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NQHR.Lambooy.Varner.Argirou.Final Draft 25.8.11

THE CORPORATE RESPONSIBILITY TO REMEDY (3RD

PILLAR

RUGGIE FRAMEWORK)

Analysis of the corporate responses in three major oil spill cases: Shell -

Nigeria; BP – US (the Gulf); Chevron – Ecuador

Authors:

Tineke Lambooy (Utrecht University, PhD), Mary Varner (University Utrecht, LL.M.), Aikaterini

Argyrou (University Utrecht, LL.M.)

Abstract

From 2005-2011, the UN Special Representative for Human Rights and Business, Prof. John Ruggie,

has built a governance framework comprising three pillars, i.e. „Protect, Respect, Remedy,‟ to clarify

the complementary roles of governments (public actors) and companies (private actors) in respect of

the protection and realisation of human rights. The first pillar of the framework concerns the State‟s

duty to protect citizens from human rights violations by private actors, such as companies. The second

pillar regards the corporate responsibility to respect human rights. The third pillar is about the shared

responsibility of States and companies to provide legal and non-legal remedies to victims of corporate

(mis)conduct. The concepts and ideas contained in this pillar still require sharpening as well as

discussion on how to put them into practice. This article centres around that question. It firstly

discusses the background and content of the third pillar: what does it mean to provide remedies, both

from the corporate governance perspective and from a more operational perspective? Next, three case

studies concerning major oil spillages will be presented. In each of them, problems with communities

escalated resulting in many legal procedures. It concerns the BP disaster in the Gulf of Mexico, and

the oil spillages and environmental pollution in water basins and soil in Ecuador and Nigeria for

which, respectively, Chevron and Shell are being held accountable in various legal proceedings.

Finally, the corporate responses by each of these multinationals towards said proceedings are

analysed from the perspective of Remedy (and the prevention of conflicts).

1. INTRODUCTION RUGGIE FRAMEWORK

From 2005-2011, the UN Special Representative for Human Rights and Business, Professor John

Ruggie, has developed a governance framework to clarify the roles of governments (public actors) and

companies (private actors) in respect of business and human rights‘(the Ruggie Framework). The

principle question addressed by the Framework is how to protect and realise human rights in light of

corporate activities that may cause or contribute to human rights violations.1 In the Framework, the

human rights governance is based upon three notions or ‗pillars‘, that is ‗Protect, Respect, Remedy‘,

which fulfil complementary functions but also strengthen each other.

The first pillar puts emphasis upon the State‘s duty to protect citizens from human rights violations by

companies. Drawing greatly on international human rights law, the first pillar of the Framework

underlines that States Parties to human right treaties have the duty to protect citizens against the acts

of third parties that violate human rights. States should proactively take a variety of measures to

prevent violations. From human rights courts‘ jurisprudence, human rights treaties bodies‘

recommendations as well as academic literature, it becomes apparent that the concept of ‗third parties‘

1 UN HRC (General Assembly), Report of the Special Representative of the Secretary-General on the issue of

human rights and transnational corporations and other business enterprises, “Protect, Respect and Remedy: a

Framework for Business and Human Rights”, 7 April 2008, UN Doc. A/HRC/8/5 (the ‗2008 Ruggie Report).

2

includes companies.2 One of the new elements in the Framework is the focus on policy coherence on

the national and international public level, mainly between the policies issued by the investment

promotion departments on the one hand and the human rights public policy makers on the other hand.3

The second pillar, which promotes the corporate responsibility to respect human rights, has gained a

lot of attention from academia as well as public policy makers and corporate actors.4 The approach

promoted by Ruggie emphasised that companies should employ due diligence to make sure that they

respect human rights in all their business operations. This includes pro-actively assessing whether the

business activities harm human rights or have the potential to do that.5 The second pillar has been

widely embraced by the various stakeholders‘ groups; the focus is now on the operationalisation

hereof.6

Regarding the third pillar, that is the shared responsibility of States and companies to provide legal

and non-legal remedies to victims of corporate (mis)conduct, there has been some research done by

Ruggie‘s team, predominantly on non-judicial grievance mechanisms. This pillar, though, still requires

a sharpening of ideas as regards the corporate approach towards solving CSR-type conflicts and

related litigation. The authors feel that the corporate world is still struggling and confused about how

to put the Remedy ideas into practice. The Remedy pillar advances the concept that companies as well

as public authorities should provide effective courses of action and remedies to victims, that is both

legal and non-legal recourse, including in-company grievance mechanisms.7 This article centres

around that question. It firstly discusses the background and theoretical content of the third pillar: what

does it mean to provide remedies, both from the corporate governance perspective and from a more

operational perspective? And: what does it mean to prevent conflicts?

Next, three case studies will be presented concerning major oil spillages: (i) Chevron, which

multinational is being held accountable for substantial oil pollution of water basins and soil in Ecuador

caused in the period that Texaco companies (presently part of the Chevron group) were the operator of

the commercial exploitation of the oil fields (from the 60s to the beginning of the 90s); (ii) Shell,

which company has to defend itself in tort claims for oil pollution in the Ogoni Delta in Nigeria; and

(iii) BP8 whose platform in the Gulf of Mexico exploded in 2010. In these cases, human rights and

environmental problems with local communities over time escalated and led to protests and litigation.

Questions to explore are how remediation is provided and whether the answers employed by the three

oil companies to solve the problems were perceived by the local communities as effective remedies. A

negative answer to this question may explain why these companies now find themselves entangled in

2 See for example the analysis in Lambooy, T.E., Corporate due diligence as a tool to respect human rights‘,

Netherlands Quarterly of Human Rights (NQHR), Vol. 28, 2010(3), pp. 404-448. 3The 2008 Ruggie Report, supra note 1, paras. 33-46.

4 The Ruggie project, Website Business and Human Rights Resource Centre, Tracking the positive and negative

impacts of over 5100 companies worldwide, at: http://www.business-

humanrights.org/Documents/RuggieHRC2008 accessed on 14 August 2011 and also see Harvard Ruggie

Website, Corporate Social Responsibility Initiative, Harvard Kennedy School, at:

http://www.hks.harvard.edu/m-rcbg/CSRI/prog_ga.html,accessed on 14 August 2011. 5 Lambooy NQHR 2010(3), supra note 2, and J. Sherman III, A. Lehr, ‗Human rights due diligence: is it too

risky?‘ Corporate Social Responsibility Initiative Working Paper No. 55, February 2010, Cambridge, MA: John

F. Kennedy School of Government, Harvard University, at: http://www.hks.harvard.edu/m-

rcbg/CSRI/publications/workingpaper_55_shermanlehr.pdf, accessed on 12 August 2011. 6 See for example, EU Tender on Due diligence Human Rights Guidelines, EU Commission Tender, No.

99/PP/ENT/CIP/11/E/ NO2S001. 7 Ruggie website supra note 4, see also activities and studies on in-company grievance mechanisms; non-judicial

remedies; also see Rees, C., Grievance Mechanisms for Business and Human Rights, Corporate Social

Responsibility Initiative Working Paper No.40, January 2008,Cambridge, MA John F. Kennedy School of

Government, Harvard University, at: http://www.hks.harvard.edu/m-

rcbg/CSRI/publications/workingpaper_40_Strengths_Weaknesses_Gaps.pdf,accessed on 13 August 2011 and by

Rees, C., Access to Remedies for Corporate Human Rights Impacts: Improving Non-Judicial Mechanisms,

Corporate Social Responsibility Initiative Working Report No.32, November 2008, Cambridge, MA John F.

Kennedy School of Government, Harvard University, at: http://www.hks.harvard.edu/m-

rcbg/CSRI/publications/report_32_consultation_report_november_08.pdf, accessed on 13 August 2011. 8 The company formally renamed itself BP-Amoco in the 90s, then dropped the ‗Amoco‘ and hence it is

presently named BP.

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many legal procedures. Finally, the corporate responses by each of these multinationals towards said

proceedings will be evaluated and analysed from the perspective of Ruggie‘s Remedy pillar (and the

prevention of conflicts).

2. THIRD PILLAR: REMEDY

2.1 WHAT IS IN THE FRAMEWORK?

As briefly explained in the Introduction, Ruggie‘s Framework ―Protect, Respect and Remedy‖ is an

attempt to make clear which roles business actors and government representatives have in

safeguarding human rights: who should do what and how are the different roles related? As regards the

first pillar of the Framework, that is the State duty to protect against human rights abuses by third

parties, including business enterprises, Ruggie points out that this should be realised by adopting and

effecting appropriate policies, regulation, and adjudication. The second pillar is put in the light of

corporate social responsibility: companies should respect human rights, which means that business

enterprises should act with due diligence to avoid infringing on the rights of others and to address

adverse impacts with which they are involved. The third pillar regards the need for greater access by

victims to effective remedies, both judicial and non-judicial. Ruggie emphasises:

each pillar is an essential component in an inter-related and dynamic system of preventative and remedial

measures: the State duty to protect because it lies at the very core of the international human rights regime; the

corporate responsibility to respect because it is the basic expectation society has of business in relation to human

rights; and access to remedy because even the most concerted efforts cannot prevent all abuse.9

In 2008, Ruggie presented his Framework to the UN Human Rights Council, which extended his

mandate until June 2011 and asked him to ‗operationalize‘ the Framework – that is, to provide

concrete and practical recommendations for its implementation.10

During the interactive dialogue at

the Council‘s June 2010 session, delegations agreed that the recommendations should take the form of

‗Guiding Principles‘ (GP).11

The GP were drafted by the Ruggie team and put up for comments in

November 2010.12

After evaluation of the comments received, a final version of the GP was released

on 30 May 2011 and endorsed by the Human Rights Council on 16 June 2011. Some of the GP have

been road-tested as well:13

the GP provisions elaborating on effectiveness criteria for non-judicial

grievance mechanisms involving companies and the communities in which they operate were piloted

in five different sectors, each in a different country. Furthermore, the Ruggie team organised ‗off-the-

record, scenario-based workshops‘ with officials from a cross-section of states, who had practical

experience in providing assistance to companies doing business in conflict-affected areas.14

In short,

the GP intend to provide guidance that is practical and informed by actual use. The next sub-section

will present what directions the GP provide regarding the Remedy pillar.

9 UN HRC (General Assembly), Report of the Special Representative of the Secretary-General on the issue of

human rights and transnational corporations and other business enterprises ,Guiding Principles on Business and

Human Rights: Implementing the United Nations “Protect, Respect, Remedy" Framework, Introduction to the

principles, 21 March 2011,UN doc. A/HRC/17/31, para. 6. 10

HR Council resolution 8/7, Mandate of the Special Representative of the Secretary General on the issue of

human rights and transnational corporations and other business enterprises, Welcoming the ―Protect, Respect and

Remedy‖ Framework and extending the mandate into a third phase, HRC/8/7,18 June 2008, paras. 1-4. 11

UN HRC loc.cit. GP 9. 12

Lambooy is an advisor to the Dutch HUGO project, which submitted comments with regard to the third pillar

to the draft GPs. The HUGO project advised to add to GP 29 that there is a need to establish a worldwide facility

for CSR dispute management (preferably in The Hague), which can: appoint expert CSR mediators; advise on

the best possible dispute management in individual cases (for example arbitration, mediation, or local

procedures); and create awareness among companies on the usefulness of preventive dispute management.

Submission available at: http://www.business-humanrights.org/media/documents/ruggie/world-legal-forum-

others-comments-re-guiding-principles-28-jan-2011.pdf, accessed on 11 July 2011. 13

UN HRC loc.cit. GP 11. 14

Idem.

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2.2 WHAT DO THE GUIDING PRINCIPLES PROVIDE REGARDING REMEDY?

One of the most difficult parts of the Ruggie Framework to implement is the Remedy pillar. While it

may be obvious when remedies are inadequate, such as in the Chevron case discussed in section 3.1,

the actual creation of an effective method of remedy is a difficult task.

2.2.1 General

GP 22 introduces the concept of ‗Remediation‘, stating that:

Where business enterprises identify that they have caused or contributed to adverse impacts, they should provide

for or cooperate in their remediation through legitimate processes.15

The Commentary elaborates:

the responsibility to respect human rights does not require that the enterprise itself provide for remediation,

though it may take a role in doing so. Some situations, in particular where crimes are alleged, typically will

require cooperation with judicial mechanisms.16

Perhaps a closer consideration of the term ‗remedy‘ and its implied finality may be helpful. Sometimes

interim measures after a rights violation is just as, if not more, important than the final settlement.

Remedying human rights violations is a process and often requires continual engagement with the

affected community. GP 25 under ‗III. Access to Remedy‘ underlines the content of process in the

context of grievance mechanisms: ―any routinised, State-based or non-State-based, judicial or non-

judicial process through which grievances concerning business-related human rights abuse can be

raised and remedy can be sought.‖17

GP 31 adds that both State-based and non-State-based non-

judicial grievance mechanisms should meet the following criteria in order to ensure their effectiveness:

(a) Legitimate: enabling trust from the stakeholder groups for whose use they are intended, and being

accountable for the fair conduct of grievance processes;18

(b) Accessible: being known to all stakeholder groups for whose use they are intended, and providing adequate

assistance for those who may face particular barriers to access; 19

(c) Predictable: providing a clear and known procedure with an indicative timeframe for each stage, and clarity

on the types of process and outcome available and means of monitoring implementation; 20

(d) Equitable: seeking to ensure that aggrieved parties have reasonable access to sources of information, advice

and expertise necessary to engage in a grievance process on fair, informed and respectful terms; 21

(e) Transparent: keeping parties to a grievance informed about its progress, and providing sufficient information

about the mechanism‘s performance to build confidence in its effectiveness and meet any public interest at

stake.22

15

Ibidem. GP 22. 16

Idem, GP 22, Commentary. 17

Ibidem, GP 25. 18

Ibidem, see Commentary to GP 31: (a) Stakeholders for whose use a mechanism is intended must trust it if

they are to choose to use it. Accountability for ensuring that the parties to a grievance process cannot interfere

with its fair conduct is typically one important factor in building stakeholder trust. 19

Ibidem, see (b) Barriers to access may include a lack of awareness of the mechanism, language, literacy, costs,

physical location and fears of reprisal. 20

Ibidem, see (c) In order for a mechanism to be trusted and used, it should provide public information about the

procedure it offers. Timeframes for each stage should be respected wherever possible, while allowing that

flexibility may sometimes be needed. 21

Ibidem, see (d) In grievances or disputes between business enterprises and affected stakeholders, the latter

frequently have much less access to information and expert resources, and often lack the financial resources to

pay for them. Where this imbalance is not redressed, it can reduce both the achievement and perception of a fair

process and make it harder to arrive at durable solutions. 22

Ibidem, see (e) Communicating regularly with parties about the progress of individual grievances can be

essential to retaining confidence in the process. Providing transparency about the mechanism‘s performance to

wider stakeholders, through statistics, case studies or more detailed information about the handling of certain

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(f) Rights-compatible: ensuring that outcomes and remedies accord with internationally recognized human

rights; and 23

(g) A source of continuous learning: drawing on relevant measures to identify lessons for improving the

mechanism and preventing future grievances and harms. 24

Furthermore, the same GP stresses the importance of community involvement.

A grievance mechanism can only serve its purpose if the people it is intended to serve know about it, trust it and

are able to use it (…) engaging with affected stakeholder groups about its design and performance can help to

ensure that it meets their needs, that they will use it in practice, and that there is a shared interest in ensuring its

success. Since a business enterprise cannot, with legitimacy, both be the subject of complaints and unilaterally

determine their outcome, these mechanisms should focus on reaching agreed solutions through dialogue. Where

adjudication is needed, this should be provided by a legitimate, independent third-party mechanism.

The Commentary to GP 25 highlights that States ―must take appropriate steps to investigate, punish

and redress business-related human rights abuses when they do occur‖ and explains that ―remedy may

include apologies, restitution, rehabilitation, financial or non-financial compensation and punitive

sanctions (whether criminal or administrative, such as fines), as well as the prevention of harm

through, for example, injunctions or guarantees of non-repetition‖. As to the procedural aspect of

remedy mechanisms it is stated that the provision of remedy should be ―impartial, protected from

corruption and free from political or other attempts to influence the outcome‖. As remarked in section

1, the Remedy pillar applies to both States and business enterprises. Each of them has to provide

remediation and organise effective remedy mechanisms in order to improve problematic situations.

As regards judicial means, international law addresses human rights abuses by providing a framework

for the recognition of rights. It provides for a system in which an international human rights court

(pursuant to a complaint from an individual and/or NGO) or a treaty body (as part of its regular visit

and reports on countries and special themes) can criticise a State for its failure to protect human rights

and in which recommendations for improvement can be made to such a State.25

International human

rights courts, however, have only jurisdiction over the State Parties that have ratified the pertinent

treaty and protocols. Moreover, these courts have no jurisdiction over companies. Judicial means can

also be found at the State level. Domestic courts provide a forum for claims against private parties like

companies. But this system has limited ability to directly address the implementation by a company of

human rights protection and the realisation of remediation for damages or grief caused by wrongdoers.

2.2.2 State-based mechanisms

As regards State-based judicial or non-judicial grievance mechanisms, the Commentary to GP 25 puts

forward that these may be administered by a branch or agency of the State, or by an independent body

on a statutory or constitutional basis, for example courts (for both criminal and civil actions), labour

tribunals, National Human Rights Institutions, National Contact Points (NCP) under the Guidelines for

Multinational Enterprises of the Organization for Economic Cooperation and Development (OECD

and OECD Guidelines),26

ombudsperson offices, and Government-run complaints offices. It is also

cases can be important to demonstrate its legitimacy and retain broad trust. At the same time, confidentiality of

the dialogue between parties and of individuals‘ identities should be provided where necessary. 23

Ibidem, see (f) Grievances are frequently not framed in terms of human rights and many do not initially raise

human rights concerns. Regardless, where outcomes have implications for human rights, care should be taken to

ensure that they are in line with internationally recognized human rights. 24

Ibidem, see (g) Regular analysis of the frequency, patterns and causes of grievances can enable the institution

administering the mechanism to identify and influence policies, procedures or practices that should be altered to

prevent future harm. 25

R. Lubbers, R., Genugten, W. Van, Lambooy, T.E., Inspirations for Global Governance, The Universal

Declaration of Human Rights and the Earth Charter, Kluwer, 10 December 2008, 60th Anniversary of the

Universal Declaration of Human Rights, pp. 46-49. 26

OECD Guidelines, the updated version dates from 25 May 2011, at:

http://www.oecd.org/document/28/0,3746,en_2649_34889_2397532_1_1_1_1,00.html, accessed on 13 August

2011.

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noted that in order to ensure access to remedy, States should facilitate public awareness and the

understanding of these mechanisms: how can they be accessed? How can support (financial or expert)

be provided for access?27

Concerning State-based judicial mechanisms, the GP declare that ―States should take appropriate steps

to ensure the effectiveness of domestic judicial mechanisms (…) including considering ways to reduce

legal, practical and other relevant barriers that could lead to a denial of access to remedy‖.28

The

success of those mechanisms ―depends on their impartiality, integrity and ability to accord due

process‖.29

Moreover, the provision of justice should not be obstructed by corruption of the judicial

process, and courts should be independent of economic or political pressures from other state agents

and/or from business actors. Various legal, practical and procedural barriers can prevent effective

justice in business-related human rights abuse cases. The Ruggie-team has identified the following

barriers that warrant special attention:

- The way in which legal responsibility is attributed among members of a corporate group under domestic

criminal and civil laws facilitates the avoidance of appropriate accountability;

- Where claimants face a denial of justice in a host State and cannot access home State courts regardless

of the merits of the claim;

- Where certain groups, such as indigenous peoples and migrants, are excluded from the same level of

legal protection of their human rights that applies to the wider population;

- The costs of bringing claims go beyond being an appropriate deterrent to unmeritorious cases and/or

cannot be reduced to reasonable levels through government support, ‗market-based‘ mechanisms (such

as litigation insurance and legal fee structures), or other means;

- Claimants experience difficulty in securing legal representation, due to a lack of resources or of other

incentives for lawyers to advise claimants in this area;

- There are inadequate options for aggregating claims or enabling representative proceedings (such as

class actions and other collective action procedures), and this prevents effective remedy for individual

claimants;

- State prosecutors lack adequate resources, expertise and support to meet the State‘s own obligations to

investigate individual and business involvement in human rights related crimes.

On the topic of State-based non-judicial grievance mechanisms, the GP30

emphasise that ―judicial

remedy is not always required; nor is it always the favoured approach for all claimants.‖ Ruggie

advises governments to expand the mandates of existing non-judicial mechanisms and/or to add new

mechanisms, such as mediation-based or adjudicative instruments. Other culturally-appropriate and

rights-compatible processes could also provide effective remediation. The effectiveness-criteria set out

above in section 2.2.1 should thereby be considered.

2.2.3 Non-State-based mechanisms

Firstly, regional and international human rights bodies have been referred to in GP 28 as ‗non-State

based grievance mechanisms‘. As these have dealt most often with alleged violations by States, it is

interesting to point out that some have also dealt with the failure of a State to meet its duty to protect

against human rights abuse by business enterprises.31

Another category encompasses operational grievance mechanisms. Typically, such remedies are

administered by enterprises, alone or in collaboration with others, including relevant stakeholders.

Alternatively, a mutually acceptable external expert or body can perform this role.GP 28 considers that

these are non-judicial, but may use adjudicative, dialogue-based or other culturally appropriate and

27

See supra note 17. 28

Idem, GP 26. 29

Ibidem, GP 26, Commentary. 30

Ibidem, GP 27. 31

Ibidem,GP 28. A different categorisation of non-State based grievance mechanisms comprises multi-

stakeholder initiatives based on membership including companies, membership excluding companies, a

combination of certification and membership, financing institutions, bilateral union-company arrangements,

national mechanisms, multilateral mechanisms, international mechanisms. For more specific examples, see Rees,

loc.cit. (note 7).

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rights-compatible processes. These mechanisms may offer particular benefits such as speed of access

and remediation, reduced costs and/or transnational reach. Business has a responsibility here, and

additionally States can play a helpful role in facilitating access to such options.32

An early-stage

recourse and resolution can be attained if an operational-level grievance mechanism is accessible

directly to individuals and/or communities adversely impacted by a company‘s activities. An

important element for access is that the grievance mechanism does not require that those bringing a

complaint first access other means of recourse and that they can engage the company directly in

assessing the issues and seeking remediation of any harm.33

Such a mechanism can serve as a channel

for those directly impacted, or threatened to be impacted, to raise concerns. Hence, it can support the

identification of adverse human rights impacts as a part of a company‘s on-going human rights due

diligence. In this way, companies can identify systemic problems and adapt their practices

accordingly. Moreover, grievances can be timely addressed in a timely manner, thereby preventing

escalation.34

The effectiveness-criteria set out above in section 2.2.1 should again be considered and

can vary ―according to the demands of scale, resource, sector, culture and other parameters.‖35

Grievance mechanisms can complement stakeholder engagement and collective bargaining processes,

but cannot substitute for them, nor should they preclude access to judicial or other non-judicial

grievance mechanisms.36

Another important consideration is that corporate human rights ambitions

and norms developed in sector, multi-stakeholder and other collaborative initiatives should provide for

clear follow-up during which affected parties or their legitimate representatives can raise concerns

when they believe the commitments in question have not been met.37

Grievance mechanisms can just

offer that.

3. CASE STUDIES

Having discussed remedies in the general sense, one can now move to the practical application of

these ideas. Unsurprisingly, there is a vast difference between theoretical commitments to the ideas

espoused in the Ruggie Framework and actual enacted policies. To illustrate how policy may fall short

of ideals, this paper focuses upon the corporate response to three incidents of oil pollution: Texaco

(now Chevron) in Ecuador, Shell in Nigeria, and BP in the Gulf of Mexico (presented chronologically

by litigation). While in these incidents one can see the evolution of more effective remedies, all three

companies rely heavily upon the court system to provide remedies and thus, according to the victims,

fail to provide full remediation. The Oil Fund utilised by BP does provide a glimmer of hope for an

alternative means of recompense but, as will be discussed below, there is still room for improvement.

3.1 CHEVRON – OIL POLLUTION IN ECUADOR

Ecuadorian protestor at Chevron‟s general shareholders meeting in 2011: “I want to remind you that our fight

in Ecuador is for life and justice you must own up to your responsibility to the people in the Amazon”. Chevron‟s CEO answered “Perhaps it‟s not enough, and we could always do more.”

(http://www.sfbg.com/politics/2011/05/26/activists-speak-out-chevrons-shareholder-meeting and

http://amazonwatch.org/news/2011/0525-18-billion-ecuadorian-lawsuit-dominates-chevron-

shareholder-meeting)

3.1.1 Problem statement: pollution impacting human rights

During twenty years of operation in rural of Ecuador and the Amazon rainforest in the 70s and 80s of

the last century, Texas Petroleum Company a subsidiary in Ecuador of Texaco. Inc. the multinational

oil company which was headquartered in Houston, Texas (hereinafter: Texaco) allegedly released

32

Idem. 33

Ibidem, GP 29. 34

Ibidem, GP 29, Commentary 35

Ibidem, GP 31. 36

Idem. 37

Ibidem, GP 30, Commentary.

8

millions of gallons of toxic waste during the exploitation of the oil facilities and the exploratory

drilling.38

Most of this waste was deposited in open natural pits, from where it was expected to be

directly discharged in the environment, either by leaching out or overflow from the rain water.39

After

the oil was extracted from the land it was pumped to special separation stations where the oil was

separated from toxic constituencies such as oil remnants, gas and toxic chemical substances all

discharged in the natural pits. Furthermore, oil and toxic waste spilled in the water streams due to

leaks of the pipelines connecting the stations, poor construction and maintenance of the special tanks

storing the oil, and the transportation processes of the oil portions in the facilities network. Cheap

infrastructure and the lack of the oil facilities led to the permanent contamination of the water, the

farmlands, and the forests while the burn of the debris gases and the waste oil products in the open pits

resulted in the air contamination with toxic particles.

Texaco‘s operations in Ecuador commenced in 1964, when a concession was agreed with the

government of Ecuador and Texaco Petroleum Company. The concession was transferred to the

subsidiaries Compania Texaco de Petroleos del Ecuador C.A (hereinafter: Texpet) and Gulf

Ecuatoriana de Petroleo S.A (hereinafter: Gulf and the Texaco-Gulf Consortium). The parties formed a

consortium (each participated for 50 per cent) and acquired the right to explore and exploit the area of

Oriente (that is East Ecuador)40

after identifying a huge amount of oil.41

In 1965, a ‗Joint Operating

Agreement‘ (JOA) was executed between Texpet and Gulf on the one side and the State on the other

side. In response to the sudden oil boom, the State of Ecuador attempted to keep the dominion over the

natural resources through the establishment of a State-owned company; this was Corporacion Estatal

Petrolera Ecuatoriana (CEPE). The 1965 JOA was replaced in 1973 by a new JOA between CEPE,

Texpet and Gulf (hereinafter: ‗The contract of 1973‘).42

Under the contract of 1973, Texpet continued

to exploit the most of the oil infrastructure, providing the State of Ecuador with the necessary

expertise to build, manage and use the oil. This resulted in a big network of pipelines and oil facilities

all over the country, but in particular concentrated in the Oriente region.

38

In the Aguinda class action the claimants accused Texaco of exploratory drilling practices generating wasting

products which contain toxic substances (...) discharged into open pits. The pits would overflow, allowing these

toxic substances to discharge into streams, rivers and groundwater from which claimants and the class obtain

drinking water and food, see factual background, US District Court for the Southern District of New York

Aguinda v Texaco Inc., Original Complaint submitted by the claimants, 3 November1993, pp.23 -24. 39

Center for Economic and Social Rights, Rights Violations in the Ecuadorian Amazon, The Human

Consequences of Oil Development, New York, March 1994, pp. 5-7. 40

The Oriente is a region of eastern Ecuador, comprising the eastern slopes of the Ecuadorian Andes and the

lowland areas of rainforest in the Amazon basin, see map, at: http://www.google.nl/imgres?q=oriente+ecuador+texaco&um=1&hl=nl&client=firefox-a&rls=org.mozilla:en-

US:official&biw=1366&bih=611&tbm=isch&tbnid=1e6VcdLGSlTZDM:&imgrefurl=http://chevronecuador.cra

zydrumguy.com/&docid=70aXhuPYNO6u9M&w=525&h=587&ei=huRUTuvJCIL0-gauy-

THBg&zoom=1&iact=hc&vpx=689&vpy=83&dur=341&hovh=237&hovw=212&tx=123&ty=117&page=1&tb

nh=160&tbnw=143&start=0&ndsp=17&ved=1t:429,r:3,s:0, accessed on 24 August 2011 41

Superior Court of Nueva Loja, Lago Agrio Class Complaint, 7 May 2003. 42

Republic of Ecuador, Ministry of Energy and Mining, Contract for implementing of environmental remedial

work and release from obligations, liability and claims, pp.1-2, at: http://chevrontoxico.com/news-and-

multimedia/2011/0302-press-kit-for-texacos-sham-remediation.html, accessed on 14 August 2011,Also Gulf Oil

was a major oil company till 1980.Actually, in 1985 it merged with SoCal. Corp and both were rebranded as

Chevron Corporation.

9

Source of the map: Chevron Toxico Website

In June 1974, CEPE acquired an undivided 12 per cent participating interest, rights and obligations

from Texpet and a 12.5 per cent interest from Gulf of the Texaco-Gulf Consortium. At that time, the

Ecuadorian government had decided to gradually nationalise the oil industry and hence it started

buying shares from Texpet and Gulf resulting in a transfer of a stake of 62.5 per cent to CEPE in 1976.

In 1992, when the contract of 1973 expired, CEPE (which was renamed into ‗Petroecuador‘) gradually

had assumed full ownership of the consortium. However, from 1973-1992, Texpet operated and

controlled most of the oil facilities and infrastructure in the region. Texpet was responsible to do so

until 1992 when the concession contract (contract of 1973) and the JOA expired. Then, Texpet,

Petroecuador and the Government undertook negotiations to determine the environmental impact

resulted from the consortium. Subsequently, the parties conducted an environmental audit identifying

contaminated areas. A settlement agreement43

between the Ecuadorian government and Texpet was

concluded in 1995, requiring exchange for a release of any liability for damages resulting from the

prior twenty operational years 44

. In 1998, after two main audits have been conducted by independent

auditors45

and under the inspection of Ecuadorian officials, the Government of Ecuador certified that

Texpet has conducted successfully its remediation programme (this will be explained in more detail

below in section 3.1.5). Since then, Texaco (later: Chevron, see below in section 3.1.2) claims that it

has been released by the Ecuadorian government from any future claims and obligations (this will be

elaborated below).46

Since 1998, Petroecuador was the remaining and sole operator of the facilities in

Ecuador.47

43

Ibidem, pp. 2-3. 44

Idem. 45

AGRA Earth & Environmental Ltd and Fugro–McCelland, see at:

http://www.texaco.com/sitelets/ecuador/en/history/background.aspx, accessed on 13 August 2011 46

‗The Republic of Ecuador, by virtue of the ―Acta Final‖ of 30 September 1998, in accordance with the

“Contrato para la Ejecución de Trabajos de Reparación Medioambiental” (Contract for Implementation of

Environment Repair Works) of 4 May 1995, absolved, liberated and forever freed Texpet, Texas Petroleum

10

The subsequent phases of ownership and control of the operations are pictured below:

First Phase: Texaco-Gulf Consortium (1965-1973)

Second Phase: CEPE-Texaco-Gulf Consortium (1973-1976): In 1974 CEPE starts buying shares

in oil consortium

Third Phase: CEPE Consortium

Third phase: CEPE Consortium (CEPE has acquired full ownership)

Company, Compañia Texaco de Petróleos del Ecuador, S.A., Texaco Inc., its employees, principals and

subsidiaries of any claim or litigation by the Government of the Republic of Ecuador concerning the obligations

acquired by Texpet in the fore-mentioned contract.‘ Letter of the Ecuadorian Ambassador, Ivonne A-Baki about

the Aguinda class action, 11 November 1998. 47

Available timeline of major events, at:

http://www.texaco.com/sitelets/ecuador/en/history/chronologyofevents.aspx, accessed on 14 August2011

Compañía

Texaco de

Petróleos del

Ecuador C.A

37.5%

Gulf Ecuatoriana

de Petróleo S.A

37.5%

CEPE

25%

State of

Ecuador

Compañía Texaco

de Petróleos del

Ecuador C.A

50%

Gulf Ecuatoriana

de Petróleo S.A

50%

State of

Ecuador

CEPE

100%

Renamed into

Petroecuador

JOA

JOA

11

However, even though remediation took place, the local inhabitants of the Oriente have never been

satisfied about the clean-up, as we can tell from the many protests and court cases that have been filed

by them. The province of Sucumbíos is probably the most contaminated province of Oriente in

Ecuador. The indigenous people have many times protested,48

and even travelled to California49

to

attend the annual shareholders meeting of Chevron (currently the ultimate parent company of Texaco

and Texpet). The protestors presented their claims and requests in the meeting as proxy shareholders

for example:50

―I want to remind you that our fight in Ecuador is for life and justice you must own up

to your responsibility to the people in the Amazon‖,51 which was expressed by a resident of Ecuador's

oil patch, to which Chevron‘s CEO answered ‗Perhaps it‘s not enough, and we could always do

more.‘52

The people of Sucumbíos, furthermore, accepted to visualise their effort towards remediation

and compensation in the documentary Crude Oil of Joe Berlinger‟, who was later subpoenaed by

Chevron together.53

In 2008, the State of Ecuador replaced its Constitution. The rationale was the

embodiment of the Right to Nature fact that was confirmed in September, 2008 by the Ecuadorian

people.54

The new Constitution recognises the right of the population to live in a healthy and

ecologically balanced environment, and declares as matters of public interest environmental

conservation, the integrity of the country‘s genetic assets, the prevention of environmental damage and

the obligation for recovery in cases of degraded natural spaces.55

Articles 396 and 397 of the new

Constitution institutionalise the capacity for policy adoption and enforcement of the laws in case of

environmental damages for the people and for the environment per se.

3.1.2 Chevron: general facts

In October 2001, Texaco merged with the US based multinational oil company Chevron Corporation

(hereinafter Chevron Corp.) establishing ChevronTexaco Corporation.56

Chevron agreed to acquire all

of the common stock of Texaco in exchange for stock in Chevron, giving to Chevron‘s shareholders

48

On 5th

October 2009 demonstration took place by indigenous peoples and peasant farmers in Lago Agrio

where they marched to the courthouse to protest against Chevron asking for remediation, at:

http://www.flickr.com/photos/rainforestactionnetwork/sets/72157622524074884/,accessed on 13 August 2011. 49

After the merger of Chevron and Texaco the new headquarters were moved to San Ramon, California see at:

Chevron‘s Press Release, Chevron moving corporate headquarters to San Ramon California, 5 September 2001

at: http://www.chevron.com/chevron/pressreleases/article/09052001_chevronmovingcorporateheadquarterstosanra

monca.news,accessed on 24 August 2011. 50

D.R.Baker, SFGate Website, Chevron CEO John Watson addresses protesters, May 26 2011, at:

http://articles.sfgate.com/2011-05-26/business/29584814_1_lawsuit-over-oil-field-contamination-ecuadoran-

judge-petroecuador,accessed on 14 August 2011. 51

C. Benett, Amazon Watch, $18 Billion Ecuadorian Lawsuit Dominates Chevron Shareholders Meeting,

at:http://amazonwatch.org/news/2011/0525-18-billion-ecuadorian-lawsuit-dominates-chevron-shareholder-

meeting,accessed on 14 August 2011. 52

C. Nairn, San Francisco Bay Guardian, San Francisco Bay Guardian, Activists speak out at Chevron‘s

shareholder meeting, 26 May 2011, see at: http://www.sfbg.com/politics/2011/05/26/activists-speak-out-

chevrons-shareholder-meeting,accessed on 13 August 2011. 53

Crude, The Real price of Oil Website by Joe Berlinger, at: http://www.crudethemovie.com/. The documentary

focuses on the litigation history and factual background of the case, see also: Chevron Website, Ecuador

lawsuits, Videos, http://www.chevron.com/ecuador/videos/,accessed on 13 August 2011. 54

The new constitution was approved after a referendum held on 28 September 2008 with 63.93 per cent votes in

favour. The constitution enhances the content of the substance of the social rights protection, creates a new right

for nature and finally provides new rights for indigenous people especially the ability to form territorial

administrative districts, International Law Observer Website, Positive vote for the new Ecuadorian Constitution

confirmed- a brief review, 16 October2008, at: http://internationallawobserver.eu/2008/10/16/positive-vote-for-

the-new-ecuadorian-constitution-confirmed-a-brief-review/ ,accessed on 24 August 2011 55

Political database of the Americas, translated version of the new Constitution of Ecuador 2008, articles (14),

(15), (18), at: http://pdba.georgetown.edu/Constitutions/Ecuador/english08.html,accesed on 13 August 2011. 56

Federal Trade Commission, FTC Consent Agreement Allows the merger of Chevron Corp. and Texaco Inc.,

Preserves Market Competition, 7 September 2001, at: http://www.ftc.gov/opa/2001/09/chevtex.shtm,accessed on

13 August 2011.

12

61 per cent of the new combined company.57

. According to Chevron, between the years 2001-2005

Texaco Inc. maintained its legal capacity as an independent company without Chevron assuming its

liabilities and obligations related to the operations in Ecuador.58

In this period Chevron operated the

combined companies‘ activities under the ‗ChevronTexaco‘ brand name.59

In 2005, before Chevron

acquired the US based multinational oil company Unocal Corp., ChevronTexaco Corp. changed its

name into ‗Chevron Corp.‘ (hereinafter: Chevron). Chevron decided to keep the brand of Texaco

together with its other retail brands such as Caltex.60

Chevron is currently the second largest oil company in the US61

. The parent company of the

international group is incorporated under the laws of the State of Delaware62

though he headquarters

are San Ramón, California. By 2011, Chevron has a workforce consisting of approximately 58,000

employees63

and 4.000 service station employees producing 2.763 millions of barrels of oil per day64

in 180 different operating countries around the world.65

Chevron‘s shares are listed at New York Stock

Exchange. Chevron‘s net income over 2010 was $19 billion66

meaning a profit of $9.48 per share, and

$2.84 of cash dividends for its shares listed at the NYSE, having a rise in 2010 of 18.5 per cent.67

According to NYSE information, Chevron is involved in every facet of energy industry: the

production and transportation of crude oil and natural gas, the refining, marketing, distribution and

transportation of fuels and the manufacturing of petrochemical products.68

3.1.3 Chevron about the Ruggie Framework and policies

The website of Chevron in respect of the development of the Ruggie Framework states:

Since 2007, Chevron has actively participated in the public consultation process with Prof. John Ruggie, the

United Nations Special Representative on business and human rights. Ruggie is developing the concept of shared

responsibility between governments and business concerning human rights. It is embodied in the U.N.

Framework—the government duty to protect and the corporate responsibility to respect human rights. Along

57

The merger occurred using a company called Keepep Inc. as special purpose vehicle wholly owned by

Chevron Corp. Texaco Inc. wholly absorbed Keepep Inc. See infra note 58. 58

Superior Court of Nueva Loja, Lago Agrio Class v Chevron/Texaco, Chevron‘s Response to the Lago Agrio

Complaint, pp. 1-3. 59

Chevron Website, History at: http://www.chevron.com/about/leadership/history/2002/,accessed on 13 August

2011. 60

Chevron Press Release, Chevron Texaco Corporation. Changes Name to Chevron Corporation, Unveils a New

Visual Image, Company continues to expand Texaco, Chevron and Caltex retail brands, 9 May 2005, at:

http://www.chevron.com/chevron/pressreleases/article/05092005_chevrontexacocorporationchangesnametochev

roncorporationunveilsanewvisualimage.news,accessed on 13 August 2011. 61

Chevron Website, US: Highlights and Operations, at: http://www.chevron.com/countries/usa/, accessed on 13

August 2011. 62

Restated certificate of incorporation of Chevron Corporation, preamble,

at:http://www.chevron.com/documents/pdf/certificateofincorporation.pdf,accessed on 13 August 2011 63

Chevron Website, Global Strategic Workforce Development, at:

http://www.chevron.com/globalissues/corporateresponsibility/2007/globalstrategicworkforce/#b2, accessed on

14 August 2011 64

Ibidem, Company profile, at: http://www.chevron.com/about/leadership/,accessed on 13 August 2011 65

Chevron‘s corporate fact sheet, March 2011, at:

http://www.chevron.com/documents/pdf/corporatefactsheet.pdf.,accessed on August 2011 66

Chevron‘s net income for 2010 was 81 per cent raised from its 2009 net income of $10.5 billion while its 2008

net income was $17billion dollars, Chevron Website, Press Release Chevron Reports Second Quarter Net

Income of $6 Billion ,Up 11 per cent From $5.4Billion in Second Quarter 2007, at:

http://www.chevron.com/news/press/release/?id=2008-08-01, see also MarketWire Website, Chevron 2010 Net

Income Rises 81% From 2009 Doldrums ,see also Industrial Info New Alert, at:

http://www.marketwire.com/press-release/chevron-2010-net-income-rises-81-from-2009-doldrums-an-

industrial-info-new-alert-1387423.htm,both websites accessed on 13 August 2011. 67

Chevron Website, Stock information, see at: http://investor.chevron.com/phoenix.zhtml?c=130102&p=irol-

stockQuote, see also Chevron Annual Report 2010, p.4,

at:http://www.chevron.com/documents/pdf/Chevron2010AnnualReport.pdf, accessed on 13 August 2011 68

NYSE Website, at: http://www.nyse.com/events/1268219685213.html,accessed on 13 August 2011

13

with our engagement with key international human rights institutions, our participation with the U.N. Framework

continues to complement the implementation of Chevron's Human Rights Policy. The business responsibility to

respect human rights, as outlined by Ruggie, suggests an operational framework to manage potential human rights issues related to business operations. Chevron's Human Rights Policy is consistent with the U.N.

Framework.69

Chevron‘s commitment is embodied in the ‗Chevron Way‘, which contains a brief list of values and

principles as well as in its ‗mission statement‘. Chevron wishes: ‗to be the global energy company

most admired for its people, partnership and performance‘70

in the value list, the company prominently

promotes protection of the people and the environment. Chevron states its commitment to a

responsible performance towards the people and the environment by prioritising the health and safety

of the company‘s workforce and the company‘s assets without mentioning anything to third parties

being victims of its corporate practices71

. The company claims that it is committed as it complies with

the letter and the spirit of all environmental, health and safety laws and regulations.72

In an effort to

comply with the new Ruggie Framework, Chevron has promoted proactive risk assessment behaviour.

It has adopted an ‗Operational Excellence Management System‘ (henceforth OEMS), for example ‗a

systemic management of process safety, health and personal safety, environmental, reliability and

efficiency in order to achieve world class performance‘73

.Its content is confidential. The OEMS

processes and performances are supposed to be audited every three years, but the most recent audit is

dated in 2007.74

Regarding respecting human rights, Chevron declares its intent for a proactive

awareness of all the potential human right risks in sensitive areas under the guidance of the Voluntary

Principles on Security and Human Rights (hereinafter VPSHR)75

and in compliance with the Universal

Declaration of Human Rights (UDHR) and the Fundamental Principles and Rights at Work (ILO

Declaration).76

Furthermore, Chevron supports the Global Compact, though this fact is not stated in its

2010 CSR report.77

Chevron reports that it has introduced the content of the VPSHR into its private

security contracts78

and that it externally is engaged with the US State Department and the

International Petroleum Industry Environmental Conservation Association (IPIECA).79

Chevron also

promotes its engagement with the local community where it operates. It states that it contributes to

their socioeconomic development,80

maintains an on-going, proactive and two-way communication

with all the potential stakeholders, and performs an ‗Environmental, Health and Security Impact

69

Chevron Website Human Rights, at: http://www.chevron.com/globalissues/humanrights/,accessed on 24

August 2011 70

See supra, the Chevron Way, at: http://www.chevron.com/about/chevronway/,accessed on 13 August 2011. 71

Idem. 72

‗All of us must obey the letter and spirit of the law at all times, wherever we live or work. Each of the

countries where our Company does business has its own laws, regulations and customs. Sometimes there can be

significant differences from one place to another and between regions within a single country. However, no

matter where we work, we are all responsible for respecting all applicable laws and following the policies in our

Code‘, Chevron Business Conduct and Ethics Code, p.4, at:

http://www.chevron.com/documents/pdf/chevronbusinessconductethicscode.pdf, accessed on 13 August 2011. 73

Ibidem, pp.14-15. 74

Idem. 75

More information about the content of the principles is available at:

http://www.voluntaryprinciples.org/principles/introduction, accessed on 13 August 2011. 76

Supra note 72, p.27. 77

Global Compact Website, Chevron‘s Communication on Progress Report submitted on 29/7/2009, at:

http://www.unglobalcompact.org/participants/detail/2035-Chevron, accessed on 13 August 2011. 78

UN Global Compact, Human Rights and Business Dilemmas Forum, Chevron Guidelines on the Voluntary

Principles and inclusion in contracts, at: http://human-rights.unglobalcompact.org/case_studies/security-forces-

and-human-rights/, access on 13 August 2011. 79

IPIECA is the global oil and gas industry association dealing with environmental and social issues improving

the industry to develop and establish good practices, to enhance communication and knowledge to work in

partnership with all the key stakeholders. It is consisted in term of membership by over the half of the world‘s oil

production and it is the main communicator with the UN in the oil and gas industry, IPIECA Website, at:

http://www.ipieca.org/about-ipieca, accessed on 13 August 2011. 80

Chevron Corporate Responsibility Report, Social Investment, at:

http://www.chevron.com/globalissues/economiccommunitydevelopment/,access on 13 August 2011

14

Assessment‘ process (EHSIA)81

in the major projects as well as those that are considered operated in

sensitive areas.82

In October 2010, Chevron announced the ‗We Agree‘ campaign, a global advertising campaign83

in

which Chevron admits the abuses of the oil industry companies, to the environment and to human

rights. In this way Chevron aims to make known its responsible character.84

‗Chevron is making a

clean break from the past by taking direct responsibility for our own actions‘ said Rhonda Zygocki,

Chevron vice president of Policy, Government and Public Affairs she follows; ‗We Agree‘ conveys

that Chevron is all for people, (…) Just as ‗We‘ is inclusive, so Chevron is inclusive. It‘s time we were

on the side of people, no matter where those people are from.‘85

Chevron also advertises its honesty in

doing business with statements such as ‗We're telling truths no one usually tells, we‘re changing the

way the whole industry speaks.‘86

In this framework of honesty and inclusivity, Chevron in the ‗We

Agree Campaign‘ declares that all companies should be aware of the environmental destruction caused

by the carbon emissions that necessitate the strict rules and policies towards the limitation of the

emissions as Chevron did.87

They mention:

For decades, oil companies like ours have worked in disadvantaged areas, influencing policy in order to do there

what we can't do at home. It's time this changed. People in Ecuador, Nigeria, the Gulf of Mexico, Richmond, and

elsewhere have a right to a clean and healthy environment too.88

Chevron recommends ‗that all companies face their mistakes directly by accepting financial and

environmental responsibilities and by funding new technology to avoid future mistakes.‘89

Finally,

Chevron claims to have the most equipped personnel for the preventing and handling of oil spill

accidents.90

However, there is no mention of physical or financial remediation or of establishing funds

to provide compensation to the victims of the abuses.

3.1.4 Litigation and collective actions

US class action litigation (1993)

81

‗The process requires all new capital products to be assessed for potential environmental, social and health

impacts and aims to the elimination and minimisation of this negative impacts. Stakeholders‘ engagement is

considered an indispensable part of the assessment‘ Chevron Website, Environment, at:

http://www.chevron.com/globalissues/environment/, accessed on 13 August 2011. 82

Frade Field in the Campos Basin offshore Brazil is an example of projects being assessed under the Chevron

EHSIA, another example is Chevron Thailand Shore Base project available at:

http://www.chuchawalroyalhaskoning.com/projects/Chevron2.html, accessed on 13 August 2011. 83

The amount spent for the ‗‘We Agree‘‘ campaign by Chevron is confidential though it is estimated that it

spends $90 million per year on advertisement only in the territory of US, Website Chevron, Press Release, at:

http://chevron-press.com/article/Radical-Chevron-Ad-Campaign-Highlights-Industry-Problems/, accessed on 13

August 2011. 84

These tactical statements can be justified especially after the incidents in the Gulf Coast on April 2010 with

BP and Deepwater Horizon and the huge contamination of the following leak which caused the aversion of the

global society against oil companies. 85

Chevron Website Press Release, Radical Chevron Ad Campaign Highlights Industry Problems, Available at:

http://chevron-press.com/article/Radical-Chevron-Ad-Campaign-Highlights-Industry-Problems/, accessed on 13

August 2011. 86

Idem. 87

Chevron We Agree Website: Stop Endangering Life, at: http://chevron-weagree.com/#mainad-4 see also

Chevron Website and Chevron‘s effort to reduce greenhouse gas emissions and improve efficiency and the

adopted seven principles for addressing climate change, at:

http://www.chevron.com/globalissues/climatechange/sevenprinciples/ and

http://www.chevron.com/globalissues/climatechange/ , all websites accessed on 13 August 2011. 88

Idem. 89

Ibidem, Chevron We Agree Campaign, Oil Companies Should Fix the Problem They Create, at:

http://chevron-weagree.com/#mainad-2, accessed on 13 August 2011. 90

Idem.

15

In 1993, 30.000 indigenous Ecuadorian citizens commenced a class action (the ―Aguinda‖91

action)92

in the US Federal District Court for the Southern District of New York against the US company

Texaco Inc. (later merged into Chevron) under the US Alien Tort Claims Act. They sought

compensatory and punitive damages as well as equitable relief93

for alleged human rights violations

and environmental damages to the Ecuadorian Amazon rainforest. Claimants alleged that Texaco

failed to use the reasonable industry standards of oil extraction or comply with American, local, or

international standards of environmental safety and protection. Claimants also alleged that Texaco Inc.

and its group companies failed to pump properly the toxic waste back into the wells, instead disposing

of it in open pits or by burning without air pollution controls, resulting in contamination of drinking

water and high level air pollution.94

The claimants also sought redress for personal injuries, diseases,

and cancers due to extensive contamination of their livelihoods and living environment.95

Texaco Inc.

consented to jurisdiction in Ecuador.96

After several appeals, the US court finally dismissed the case in

May 2011 on grounds of forum non conveniens97

and requested Texaco to consent to be bound by any

ruling of the Ecuadorian courts and to honour any judgment rendered on the claimant‘s claims.

The Alien Tort Claims Act98

enables US courts to exercise extraterritorial ‗jurisdiction for a civil

action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United

States.‘99

Ecuadorian claimants stated in their complaint: ‗Defendant's acts and omissions of

intentionally and tortuously discharging crude oil and other toxins into the environment; in damaging

the pristine rain forests of the Oriente; in destroying the streams, rivers, waterways and aquifers, and

in threatening the survival of the indigenous people of the Oriente, violate the law of nations,

international law, worldwide industry standards and practices, as well as the laws of the United

States.‘ Aguinda case was dismissed in the US courts; it was refilled in the Ecuadorian courts as the

Lago Agrio complaint.

New Ecuador laws 1999 leading to Lago Agrio claims in Ecuador court (2003)

Until 1999, Ecuadorians were legally able but procedurally unable to file a class action before the

Ecuadorian courts although the Law of Prevention and Control of Environmental Pollution (enacted in

1976).100

This incapacity was due to the general and abstract wording of the provisions of the above

mentioned law. The existing laws had never been actually tried to be enforced in the Ecuadorian

courts.101

Despite the recognition of an actio popularis102

there was no adequate substantial legal basis

91

Maria Aguinda and Carlos Crefa were individually guardians for the class. 92

Amazon Defence Coalition, Understanding Chevron Amazon “Chernobyl”, Detailed Background on

Landmark Legal Case over Chevron‟s Environmental Contamination in Ecuador, Amazon Defence Coalition,

Ecuador, Winter 2009. p. 3. 93

‗ This is a class action brought on behalf of citizens and residents of the Amazon region of Ecuador known as

the ‗Oriente‘ against Texaco Inc.. Claimants and the class seek compensatory and punitive damages, and

equitable relief, to remedy the pollution and contamination of the claimants' environment and the personal

injuries and property damage caused thereby (…) As more fully set forth in the ‗Factual Background‘ and

‗Claims for Relief‘ sections of this Complaint, Texaco did not use reasonable industry standards of oil extraction

in the Oriente, or comply with accepted American, local or international standards of environmental safety and

protection. Rather, purely for its own economic gain, Texaco deliberately ignored reasonable and safe practices

and treated the pristine Amazon rain forests of the Oriente and its people as a toxic waste dump.‘ Loc. cit.

(Aguinda Complaint). p. 4. 94

Idem. 95

Idem. 96

US District Court, Southern District of New York, Memorandum order, No: 93Civ.7527 (JSR), 12 August

1997. 97

US Court of Appeals Second Circuit, Aguinda v Texaco Inc., 16 August 2002, at:

http://ftp.resource.org/courts.gov/c/F3/303/303.F3d.470.01-7758.01-7756.html, accessed on 13 August 2011. 98

28 U.S.C §1350. 99

Idem. 100

Ley de prevencion y control de contaminacion ambiental, Decreto Supremo No. 374. RO/ 97, 31 de Mayo de

1976. 101

Other existing Ecuadorian Decrees generally regulating business conduct and environmental degradation

during 60s and 70s comprised: the ‗Hydrocarbon Law‘ (enacted in 1971) which required oil producers to adopt

all necessary measures for the protection of the flora and fauna, to prevent the pollution of water, the atmosphere

16

in the Ecuadorian legal system to support the claimants‘ claims for remediation and compensation for

environmental damages.103

Instead, the claimants commenced the abovementioned US class action in

1993.

While the parties of the Aguinda case were litigating in the US, in 1999 the Ecuadorian government

enacted the Environmental Management Act (original name is in Spanish hereafter referred as EMA).

The EMA provides claimants the ability to bring an action for the cost of remediation of

environmental harms, even absent of proof of any personal injury or property damages for a specific

claimant.104

Any Ecuadorian is now allowed to file a suit asking remediation for environmental

damages on behalf of the collective. Articles 41 and 42 provide:

(…) a forum for any natural or legal person or human group to denounce the violation of environmental

standards, and guarantees the ability to be heard in any criminal, civil or administrative court by the initiation of

proceedings due to environmental violations.105

Article 43 allows a class action before the Ecuadorian courts for

the reparation of environmental damages, including ‗damage caused to health or the environment including

biodiversity, damagecompensation for the community directly affected and repair of damages caused.106

Taking advantage of the EMA, the claimants107

filed a new suit in 2003 against ChevronTexaco .Corp.

This suit sought the removal of the contaminating elements threatening the environment and health of

the local inhabitants, the cleaning of all the contaminated areas, the removal of all the structural

elements and machinery that cause the contamination, the clearance of the contaminated terrains,

plantations, crops of the claimants and the compensation to all the affected people, the recourse to be

delivered to the NGO Amazon Defense Coalition.108

Chevron replied to this claims stating that the court has no jurisdiction and competence over the case,

the EMA has no retroactive application, and that the ChevronTexaco Corp. is not the successor of

Texaco Inc. and thus has never acted in Ecuador nor has been a party in a concession contract with the

Ecuadorian Government

After eight years of extensive litigation, the Ecuadorian court delivered its judgment in February 2011,

finding Chevron liable for $18.2 billion in total damages. The court specifically imposed $8.646

billion in damages for reparations measures, $864 million directly to the Amazon Defense Coalition

which was not a named claimant in the litigation and another $8.646 billion as a punitive penalty

and land and the Hydrocarbon Exploration and Exploitation Regulations, Decree 530 (1974), which required the

operator to take all necessary measures and precautions to avoid damages or injuries to persons, properties,

natural resources and locations of religious or archaeological interest. The decrees were characterised by a

pragmatic inability to bring claims for environmental damages in the Ecuadorian courts using the Ecuadorian tort

system under their vague and weak provisions. See Texaco in Ecuador, Environmental and Health Claims, at:

http://www.texaco.com/sitelets/ecuador/en/responsetoclaims/default.aspx, also supra(note 18),pp. 23-25 102

Ecuadorian Civil Code, author‘s translation, article 2236 of actio popularis: ‗as a general rule, a popular

action is granted in all cases of contingent harm that threatens indeterminate persons because of someone‘s

imprudence or negligence. But if the harm threatens only determinate persons, only one of them may file the

action‘ 103

Center for Economic and Social Rights Report, loc. cit. (note 4). 104

Articles 41 and 42 of the Environmental Management Act. 105

Author‘s translation. The original articles of EMA read as follows :Article 41: „Con el fin de proteger los

derechos ambientales individuales o colectivos, concédese acción pública a las personas naturales, jurídicas o

grupo humano para denunciar la violación de las normas de medio ambiente, sin perjuicios de la acción de

amparo constitucional previsto en la Constitución Política de la República (…), será el competente para

conocer las acciones que se propongan a consecuencia de la misma. Si la afectación comprende varias

jurisdicciones, la competencia corresponderá a cualquiera de los presidentes de las cortes superiores de esas

jurisdicciones‟, at: http://www.derecho-ambiental.org/Derecho/Legislacion/Ley-Gestion-Ambiental-

Ecuador.html, accessed on 13 August 2011. 106

Idem. 107

Most of the claimants overlap with those in the Aguinda Class Action. Claimants were added also from the

provinces of Sucumbíos and Quito. 108

Superior Court of Nueva Loja, Lago Agrio Class v Chevron Corp, Lago Agrio Judgment, No: 2003-0002, 14

February 2011.

17

unless Chevron issues a public apology in Ecuador or in the US within 15 days of the judgment.109

Chevron appealed the case in March 2011.110

Chevron‘s public response to this judgment was:

The Ecuadorian court‘s judgment is illegitimate and unenforceable. It is the product of fraud and is contrary to

the legitimate scientific evidence. Chevron will appeal this decision in Ecuador and intends to see that justice

prevails. US and international tribunals already have taken steps to bar enforcement of the Ecuadorian ruling.

Chevron does not believe that today‘s judgment is enforceable in any court that observes the rule of law.

Chevron intends to see that the perpetrators of this fraud are held accountable for their misconduct.111

Considering that Chevron has no assets anymore in Ecuador, the claimants have to seek relief for

enforcement in other jurisdictions where Chevron holds assets, such as in the US.112

Enforcing a

foreign judgment in the US requires recognition by American courts. The recognition procedure varies

a bit from state to state. The US court reviews the case materials determine that the foreign court did

not act in a manner contrary to US judicial system/policy/etc. The other party has the opportunity to

present their own materials, and will probably argue that the foreign court was unfair, didn‘t follow

due process, etc. The US court then announces its own judgment, which may be just a repetition of the

foreign judgment. As far as the authors could determine the Ecuadorian claimants have not yet –as per

September 2011-commenced a recognition procedure in the US .However, in the US there is no direct

enforcement mechanism regarding foreign judgments.

BIT arbitration

Interestingly before the Ecuadorian court issued the judgment in February 2011 Chevron commenced

arbitration proceedings, already in 2009, under the US-Ecuador before the international UNCITRAL

arbitral tribunal administered by the Permanent Court of Arbitration in The Hague (hereinafter: the

‗BIT tribunal‘).113

Chevron claimed that the Ecuadorian courts handling the Lago Agrio case had

violated Chevron‘s due process rights because Lago Agrio litigation had violated the settlement

agreement of 1995 between the government and Texaco.114

Chevron also argued that the president of

Ecuador, Rafael Correa interfered in the Lago Agrio proceedings by visiting the polluted sites and by

announcing its support for the Lago Agrio claimants. Finally Chevron alleged the Ecuadorian judiciary

had conducted the case ‗in total disregard of Ecuadorian law, international standards of fairness, and

Chevron‘s basic due process and natural justice rights.‘115

In the arbitration, Chevron and Texpet seek

(i) a decision that they have no liability or responsibility for environmental impacts, that Ecuador has

breached the BIT and the release of Texpet, (ii) an order requiring the Ecuadorian court to recognise

that Chevron has been released from all liabilities due to the 1992 settlement, (iii) a declaration that

Ecuador and Petroecuador are exclusively liable for the execution any judgment issued in the Lago

Agrio case, and (iv) finally indemnification for any judgment entered against it in the Lago Agrio case.

Subsequently, in December 2009, Ecuador sought before the US Federal Southern District Court of

New York an order for the restraint of the arbitration proceedings, which upheld the competence of the

BIT tribunal.116

In March 2010, the BIT tribunal found that Ecuador had ‗breached Article II (7) of the

109

See supra note 41, Lago Agrio Class Complaint. 110

Sucumbíos Provincial Court of Justice, Lago Agrio Class v Chevron Corp, Lago Agrio Appeal by Chevron, 9

March 2011. 111

Chevron Website Press Release,14 February 2011,

at:http://www.chevron.com/chevron/pressreleases/article/02142011_illegitimatejudgmentagainstchevroninecuad

orlawsuit.news, accessed on 24 August 2011. 112

Kluwer Arbitration Website, at: http://kluwerarbitrationblog.com/blog/2011/02/15/ecuador-court-fines-

chevron-8-6-billion/,accessed on 14 August 2011. 113

Permanent Court of Arbitration, Hague Chevron‘s Request for Arbitration, 23 September 2009, and also

Claimants‘ Memorial on the Merits, 6 September 2010, at:

http://www.eenews.net/assets/2011/05/25/document_gw_01.pdf,accessed on 13 August 2011. 114

Ibidem, Para. 69. 115

Idem. 116

‗(…) New York Civil Practice Law and Rules because the Lago Agrio judgment falls within the content of

Article 53 including fraud and a judicial system that does not provide impartial tribunals that are incompatible

with due process – the Court of Appeals found that the arbitration claim was not inconsistent with Texaco‘s

earlier promise to the lower courts and rejected each of Ecuador‘s estoppel claims Chevron‘s consent to the

18

BIT through the undue delay of the Ecuadorian courts and is liable for the damages to the Claimants

resulting therefrom.‘117

In February 2011, the BIT tribunal s in its order for interim measures ordered the Ecuadorian state to

suspend the enforcement of the Lago Agrio judgement inside and outside of Ecuador

The Respondent (meaning the State of Ecuador) has to take all measures at its disposal to suspend or cause to be

suspended the enforcement or recognition within and without Ecuador of any judgment against the First

Claimant (Chevron) in the Lago Agrio Case.118

By September 2011 there is no clarity yet as to any further actions will be taken by the Ecuadorian

claimants in order to get their Ecuadorian judgement enforced in the US against Chevron‘s US assets.

Chevron lawsuit against Lago Agrio claimants

Before the BIT tribunal had delivered its judgment, Chevron had already filed another lawsuit in

February 2011 in the US federal District Court of New York against the Lago Agrio claimants, their

lawyer Donziger and the NGO Amazon Defense Coalition (hereinafter ADC see below) under the US

Racketeer Influenced and Corrupt Organizations Act (RICO). Chevron thereby sought a temporary

restraining order and/or preliminary injunction against defendants and a court declaration that ‗any

judgment against Chevron in the Ecuador lawsuit (meaning the Lago Agrio lawsuit) is the result of

fraud and therefore unenforceable.119

In March 2011, the court indeed issued the preliminary

injunction that Chevron petitioned.120

However, the US Court of Appeals for the Second Circuit

overturned this order.

3.1.5 The 1992-1998 Settlement and Remediation Programmeme of Texaco in Ecuador

In 1992 at the end of the concession agreement between Texpet and the government of Ecuador a

settlement agreement was negotiated where Texpet would assume responsibility for specified

environmental remediation projects corresponding to its minority interest (35.7 per cent) for the years

between 1973-1992, in which period Petroecuador acquired full ownership of all the facilities. In

exchange it would be released from any future liability even for the projects outside of its ‗Scope of

Work‘.121

The Government, Texpet and Petroecuador in 1994 signed a Memorandum of Understanding

(hereinafter MOU) in which they agreed to forgive Texpet ‗for environmental impact arising from the

operations of the consortium‘ accomplished in two steps.122

The first step involved the release of

Texpet from any responsibility for environmental impacts not included in the specified projects that

would be repaired by Texpet, and the second step was releasing any responsibility of Texpet related to

the ‗Scope of Work‘ upon remediation.

In 1995, the parties signed a ‗Settlement Agreement‘ identifying the scope of work for Texpet and

specifying the particular sites that constitute Texpet‘s remediation responsibility. The State of

Ecuador, as a consideration for full remediation, insisted that Texpet must negotiate with four

municipalities in Oriente and take into account the specific remediation and relief that the

municipalities were seeking. Between 1992 and 1998, contractors implemented the agreed upon

remediation programme and Texpet funded $1 million to certain community programmes as a

socioeconomic compensation. Finally, Texpet settled its disputes with four Ecuadorian municipalities

by entering into written agreements and releases. Texpet had also settled its disputes with the

provinces of Sucumbíos and Napo. The citizens who are the claimants in the Lago Agrio case live in

said provinces. In 1998, Texpet, Petroecuador, and the Government of Ecuador executed a ‗Final Act

jurisdiction of Ecuador‘ available at US Court of Appeals for the Second Circuit, Aguinda v Texaco Inc.,

Decision for dismissal, No:01-7756(L),16 August 2002, pp. 8-9. 117

Permanent Court of Arbitration, Hague, Partial Awards of the Merits, 30 March 2010, pp. 246-249. 118

Idem, Order for Interim Measures, No:2009-23,9 February 2011. 119

US District Court, Southern District of New York, Chevron‘s Complaint, No:11 civ 0691, 1 February 2011. 120

Idem, Judge Lewis Kaplan‘s Judgment, No:11civ 0691, 7 March 2011, p. 125. 121

„The Scope of Work consisted the specified projects decided to be remediated by Texaco and Petroecuador in

1995‟, Permanent Court of Arbitration, Hague , Claimant‘s Notice of Arbitration, 23 September 2009, pp. 3-6. 122

Idem.

19

of Compliance of the Contract for the Carrying out the Environmental Repair Works and Liberation of

Responsibility and Demands‘. The $40 million remediation programme was audited by two

independent internationally recognised consulting firms, also under the inspection and certification of

the Ecuadorian government.123

Claimants in the Lago Agrio complaint challenged ChevronTexaco

Corp.(as it was renamed after the merger) for its remediation performance, stating that it was

insufficient and inadequate considering the existence of polluting elements thrown into the

environment that continue to cause ecological and personal damages.124

The court in Lago Agrio ruled

on Chevron‘s defence stating that both the MOU in 1994 and the final 1995 agreement released

Texaco only from governmental claims but not from claims brought by third parties.125

Nonetheless, in this case, the claimants, who were not a party to the mentioned contract, maintain that beyond

the possible fulfilment of the contract, there is contamination at these sites that signifies a risk to their health and

their lives. It is the opinion that these citizens cannot see themselves deprived of their fundamental rights, and in

exercise of them have brought action before the public body charged with administering justice, settling

competence on this Presidency of the Court so it would pronounce on their claim for the redress of various

environmental harms that supposedly occur in several of the same subject of the Contract As we have reviewed

lines above.126

The court also found in a contamination test that the remediated well sites were equally polluted as

those which have not been cleaned by Texpet in 1995 and were never cleaned in the past.127

3.1.6 Role of the NGO ADC and the trust fund

A number of NGOs are actively involved in the Ecuador pollution protests and law suits. Three are

specifically relevant such as Amazon Watch,128

the Rainforest Action Network (RAN)129

and the

Amazon Defense Coalition (ADC, that is aka Amazon Defense Front or Frente de Defensa De la

Amazonia). The latter one is the NGO mostly involved in the legal disputes. ADC was created in June

1995 as an NGO based in Nueva Loja, Sucumbíos after the approval of the Ecuadorian Ministry of

Social Welfare130

with the objective is to be the most prominent representative of the Amazon people,

to integrate the entire population of the Amazon Basin in order to defend and protect their interest on

their natural resources and finally to pursue legal action against those who caused environmental

damage.131

ADC commenced the class actions of Aquinda in 1993. Ten years later, the Lago Agrio

judgment named ADC as the beneficiary of the trust of the compensation to be paid by Chevron:

123

Texaco in Ecuador Website Remediation, at:

http://www.texaco.com/sitelets/ecuador/en/remediation/default.aspx , accessed on 13 August 2011 124

Supra note 41, Lago Agrio Class Complaint, pp. 8. 125

Memorandum of Understanding, Government of Ecuador, Petroecuador and Texaco Petroleum Company,

Chapter IV, Release of Texpet from Obligations, Para. (b), at: http://chevrontoxico.com/assets/docs/1994-

mou.pdf, accessed on 13 August 2011,and also Contract for Implementing of Environmental Remedial Work and

Release from Obligation, Liability and Claims, Chapter V, Release of Claims, paras. 5.1, 5.2, pp. 9-10, ‗The

Government and Petroecuador shall hereby release, acquit and forever discharge Texpet, Texaco Petroleum

Company (…) principals and subsidiaries of all the Government‘s and Petroecuador‘s claims against the

Releases for Environmental Impact arising from the Operations of the Consortium‘, at:

http://chevrontoxico.com/assets/docs/1995-remediation-agreement.pdf,accessed on 13 August 2011. 126

See supra note 108, Lago Agrio Judgment, paras. 12-13. 127

Idem, during the litigation it has been possible to confirm that many sites included in the Remediation

Agreement, which after the execution of the works were accepted as remediated by the Government, still

nowadays have contamination at levels that are dangerous, which should be eliminated in order to protect the

health of persons‘. 128

Amazon Watch, at: http://amazonwatch.org/, accessed on13 August 2011. 129

Rainforest Action Network, at: http://ran.org/ , accessed on 13 August 2011. 130

No 535, Ministerio de Bienstar Social (MBS),4 June 1995, at: http://www.ecuanex.net.ec/fda/fda.htm,

accessed on 13 August 2011. 131

Idem, Objectives, Integrar a toda la población organizada de la Amazonía, con el fin de proteger y defender

sus intereses integrales, así como sus recursos naturales renovables y no renovables; (…)Velar que los

organismos públicos o privados, nacionales e internacionales que realicen cualquier actividad susceptible de

afectar al medio ambiente en la Amazonía, incorporen en sus planes o programmeas de acción, el principio de

20

Within a period of 60 days of the date of service of this judgment, the claimants shall establish a commercial

trust, to be administered by one of the fund and trust administrator companies located in Ecuador (…) The entire

endowment shall cover the necessary costs for the contracting of the persons in charge of carrying out the

measures of reparation (…) and the legal and administrative expenses of the trust. The representatives of the

Defence Front or those they designate on behalf of the affected persons will constitute the board of trust, which

will be the body for decision-making and control and will establish a reparation plan within the parameters

established 132

In 2011, Chevron in its complaint under RICO accused amongst others ADC for conspiracy causing

‗maximum damage to the company‘s reputation (…) and to put personal pressure on the company‘s

executives by disrupting Chevron‘s relations with its shareholders and investors, to provoke US

federal and state governmental investigations and thereby force company into making a payoff‘133

in

order to ‗achieve extortion, money laundering, obstruction of justice, unjust enrichment and civil

conspiracy‘.134

Chevron also asserted that it is questionable if ADC is an existing legal person and why it is the main

financial beneficiary of all the litigation proceedings of Lago Agrio while it has never presented a non-

profit report or an annual report. At Chevron‘s RICO complaint135

Chevron stated that the claimants

seek no individual damages because they were forced by the conspirators to sign the Lago Agrio

complaint; the claimants could not benefit of the redress provided by the Lago Agrio judgment

because they are under fraud and corrupt acts perpetrated on their behalf .ADC was allegedly engaged

in tortious acts such as solicitation of funds for the purpose of carrying the conspiracy, publication of

false and misleading statements through its website , use of lobbying practices in the US Congress.

Except from the official accusations against ADC by Chevron the existence of ADC generates

questions regarding its reason of formation in Ecuador instead of US, despite US funding and a US

public relation company. This vagueness with respect to the main trustee of the victims‘ compensation

is problematic especially because the court itself in Lago Agrio did not manage to put substantive

safeguards regarding ADC‘s role as a beneficiary. It also poses questions on the level and way of

involvement of the NGOs in these remediation efforts and the need for transparency of the remediation

procedures.

3.1.7 Concluding remarks on Chevron

Summarising, the authors draw the attention to the following observations based on the previous

sections:

(i) A settlement agreement with the State of Ecuador required Texaco to clean- up all of its operating

areas for the years 1964-1992. Texaco and, later Chevron, emphasise that their responsibility has

ended because of this agreement.

(ii) In 1993, the inhabitants of the impacted area were unsatisfied with the clean-up and filed a claim

in a US Federal Court under US law, that is, based on the ATCA. After much litigation and

several appeals, the case was dismissed under the doctrine of forum non conveniens.

desarrollo sustentable y tecnología de punta(…) Llevar adelante acciones legales contra quienes causen daños

ecológicos, ambientales y sociales en la Región Amazónica, con el fin de obtener las correspondientes

reparaciones o indemnizaciones, o, que se sancione a los culpables, según el caso; Respaldar las acciones que

realice cualquier organización social en favor del respeto al medio ambiente. 132

Supra note 108, pp. 186-187 133

Supra note 119, Chevron‘s RICO Complaint. 134

A. Thorne, NowPublic, Examining the NGOs Behind the Chevron Ecuador Lawsuit, 10 August 2009,at:

http://www.nowpublic.com/environment/examining-ngos-behind-chevron-ecuador-lawsuit-1,Vloggerheads

,Amazon Defence Coalition a Fake Company created by Hinton Communications for Chevron Ecuador Case,4

May 2009, at: http://www.vloggerheads.com/profiles/blogs/amazon-defense-coalition-a , accessed on 13 August

2011. 135

Supra note 133.

21

(iii) In 2003, the case was re-filed in Ecuador under Ecuadorian law, the EMA. This new act created a

collective cause of action for environmental damage.

(iv) In 2011, the Ecuadorian Court found Chevron (who had subsumed Texaco after the merger in

2001) liable, awarding damages to the affected villagers.

(v) However, an UNICITRAL tribunal found that Ecuador was acting in breach of a BIT, and hence

that the Ecuadorian the judgment was unenforceable. So far (by September 2011), no one has

attempted to enforce the judgment in the US.

(vi) Litigation continues over the funds granted to the villagers. It is doubtful that meaningful

recompense will be available in the near future. One cannot help but wonder what the Ecuadorian

environment would look like if the legal fees involved in this case had instead been spent on

clean-up.

3.2 SHELL – OIL POLLUTION IN NIGERIA

In the aftermath of Deepwater, Shell‟s CEO Peter Voser explained to financial analysts in February

2011: “The risk-management practices of some companies in the Gulf of Mexico do lag behind the

standards set by other companies. We at Shell have been applying the best of the North Sea standards

to our worldwide operations for many years.” (http://royaldutchshellplc.com/category/peter-voser/)

3.2.1 Problem statement: pollution impacting human rights

In August 2011, a major new independent scientific assessment report came out: Environmental

Assessment of Ogoniland (the Report or the UNEP Report).136

It reported on the environmental and

public health impacts of oil contamination in Ogoniland, a kingdom in Nigeria's Niger Delta region,

and recommended options for remediation. The United Nations Environment Programme (UNEP)

undertook this assessment at the request of the Federal Republic of Nigeria. The Report shows that

pollution from over 50 years of oil operations has penetrated further and deeper than many may have

supposed.137

The Ogoni have been claiming for decades that Shell has devastated their area.138

They

136

The Report is available at: http://postconflict.unep.ch/publications/OEA/02_ch02_UNEP_OEA.pdf. See also

for example UNEP news items ‗UNEP Ogoniland Oil Assessment Reveals Extent of Environmental

Contamination and Threats to Human Health‘; at:

http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=2649&ArticleID=8827&l=en&t=long,

and FD Selections, I. Bökkerink and Mathijs Schiffers, 5 Augustus 2011, ‗VN willen dat Shell en partners $ 1

mrd opzij zetten voor Nigeria. Olieconcerns zoals Shell moeten samen met de Nigeriaanse overheid zorgen voor

een startkapitaal van $ 1 mrd om de schade die door olielekken is toegebracht aan het milieu in een deel van de

Nigerdelta te herstellen‘, at:

http://www.fdselections.nl/Energie/Nieuws/UithetFD/articleType/ArticleView/articleId/25733/hoofdartikel.aspx.

All accessed on 5 August 2011. 137

The concerned area is shown on a map on p. 44 of the UNEP Report. In the assessment, UNEP has been

working with the Rivers State University of Science and Technology, Nigerian government officials at the

national and Rivers State level, traditional rulers, local landholders, laboratories and many other stakeholders.

During 14 months, the UNEP team examined more than 200 locations in Ogoniland, assessed approximately

1000 square kilometers, surveyed 122 kilometres of pipeline rights of way, reviewed more than 5,000 medical

records and engaged over 23,000 people at local community meetings. Detailed soil and groundwater

contamination investigations were conducted at 69 sites, which ranged in size from 1,300 square metres

(Barabeedom-K.dere, Gokana local government area (LGA) to 79 hectares (Ajeokpori-Akpajo, Eleme LGA).

Altogether more than 4,000 samples were analysed, including water taken from 142 groundwater monitoring

wells drilled specifically for the study and soil extracted from 780 boreholes. A source at UNEP office reported

that the study cost $9.5 million and was (partly) funded by Shell Petroleum Development Company. The Report

was formally presented to the Nigerian President The Hon Goodluck Jonathan in the Nigerian capital Abuja on 4

August 2011. 138

See for an overview: Lambooy, T.E. and Rancourt, M-È. (2008), „Shell in Nigeria: From Human Rights

Abuse to Corporate Social Responsibility‟, in Human Rights & International Legal Discourse, Vol. 2, No. 1. See

also: Amnesty International, Report ‗Nigeria: Petroleum, Pollution and Poverty in the Niger Delta‘, June 2009,

22

have tried to stop the pollution and the gas flaring by asking, demanding, protesting, and filing court

cases in Nigeria and elsewhere against Shell and the Nigerian state. They partly succeeded in stopping

Shell to undertake new operations in the area (MOSOP, 1993)139

. However, the existing exploitation

consisting of oil pumping installations, pipe lines, and gas flaring continued to be in use. The Ogoni

have asserted that they suffer from health problems and that the oil pollution has destroyed their farm

lands and fishing ground, hence their means of existence. The Report confirms what the Ogoni have

been stating for a long time, the human and environmental tragedy associated with the oil

contamination. According to Achim Steiner (UNEP Executive Director), the Report provides the

scientific basis on which a long overdue and concerted environmental restoration of Ogoniland can

begin. He said: ―The oil industry has been a key sector of the Nigerian economy for over 50 years, but

many Nigerians have paid a high price, as this assessment underlines.‖ The oil production in

Ogoniland has generated $ 30 mrd to the Nigerian government according to the Report‘s estimate.140

The Report supports the claims of the Ogoni and Amnesty141

that their rights to water, food,

health, environment, and to maintain a traditional way of living and culture, have been violated or at

least been put into danger by oil operations in Ogoniland. 142

As regards health, the Report concludes

that ―the Ogoni community is exposed to hydrocarbons every day through multiple routes. While the

impact of individual contaminated land sites tends to be localised, air pollution related to oil industry

operations is all pervasive and affecting the quality of life of close to one million people‖. Besides

causing health threats, these factors negatively impact the Ogoni‘s ability to continue their traditional

farmer and fishermen lifestyle, and have impeded their capacity to find drinking clean water and to

generate food. The assessment also revealed that ―control and maintenance of oilfield infrastructure in

at: http://www.amnesty.nl/sites/default/files/public/nigerdelta_rapport.pdf, accessed on 7 august 2011; and

‗Complaint to the UK and Dutch National Contact Points under the Specific Instance Procedure of the OECD

Guidelines for Multinational Enterprises‘ regarding the Royal Dutch Shell operations in the Niger Delta of 25

January 2011, submitted by Amnesty International, Friends of the Earth International and Friends of the Earth

Netherlands; at: http://www.foei.org/en/resources/publications/pdfs/2011/oecd-submission, accessed on 6 august

2011. See also, for example.: The (spoof ) "Erratum" to Shell's 2010 annual report, presented during the Shell

annual general assembly on 17 May 2011 in The Hague by Milieudefensie and Friends of the Earth

International; at: http://milieudefensie.nl/publicaties/rapporten/erratum-to-annual-re port, accessed on 6 July

2011. See regarding gas flaring,for example.: Milieudefensie (i.e. Friends of the Earth Netherlands), website

news item, ‗Milieudefensie: Shell en Nigeriaanse overheid blijven deadline voor stop affakkelen gas

verschuiven‘, at: http://www.duurzaam-ondernemen.nl/detail_press.phtml?act_id=8668, accessed on 6 August

2011, and Campaign ‗Nigeria is on fire. Shell, stop it! ‘; In Nigeria, Shell keeps almost 100 gas flares burning,

day and night. Together, these gas flares produce as much CO2 as four million cars. But this gas could be used

for other purposes, such as electricity generation‘; e at: http://milieudefensie.nl/english/shellinnigeria/gasflaring,

accessed on 6 august 2011. 139

Lambooy, Rancourt, loc. cit., note 138, p. 237. See also the Shell 2010 Annual Report and Form 20F on

Nigeria onshore operations in the Niger Delta; at:

http://www.annualreportandform20f.shell.com/2010/servicepages/search.php?q=nigeria&pageID=37843&cat=m

, accessed on 8 August 2011. 140

Idem. FD Selections 5 August 2011. 141

Amnesty International Report 2009,loc.cit.(note 138) 142

Evidence presented in the Report shows that in many Ogoni communities (10), drinking water is

contaminated with high levels of hydrocarbons, which seriously threatens public health. In one community

(Nisisioken Ogale), the water wells are contaminated with benzene - a known carcinogen - at levels over 900

times above World Health Organization guidelines. An 8 cm layer of refined oil was found floating on the

groundwater which serves the wells. This was reportedly linked to an oil spill which occurred more than six

years ago. The site is close to an oil pipeline. UNEP recommends that this warrants emergency action ahead of

all other remediation efforts. Other areas, which appear unaffected at the surface, are in reality severely

contaminated underground. The impact of oil on mangrove vegetation has also been disastrous. According to the

Report, the highly persistent oil contamination of many intertidal creeks has left mangroves - nurseries for fish

and natural pollution filters - denuded of leaves and stems with roots coated in a layer of bitumen-type substance

sometimes one centimetre or more thick. This effectively resulted in a destruction of fish habitat as fish tend to

leave polluted areas in search of cleaner water, hence causing an impossible situation for the local fisheries

sector: ―Where entrepreneurs have established fish farms for example their businesses have been ruined by an

"ever-present" layer of floating oil‖. Regarding oil spill on land, it was reported that often fires break out, killing

vegetation and creating a crust over the land, making remediation or re-vegetation difficult.

23

Ogoniland has been and remains inadequate: the Shell Petroleum Development Company's own

procedures have not been applied, creating public health and safety issues‖.

In order to bring back the contaminated drinking water, land, creeks, and important ecosystems

such as mangroves to full, productive health, the whole area of Ogoniland requires environmental

restoration. The Report estimates that while some on-the-ground results could be immediate,

countering and cleaning up the pollution and catalysing a sustainable recovery of Ogoniland could

take 25 to 30 years. It is suggested to deploy modern technology for the clean- up, improved

environmental monitoring and regulation, and collaborative action between the government, the Ogoni

people, and the oil industry. The Report indicates that this could prove to be ‗the world's most wide-

ranging and long term oil clean-up exercise ever undertaken‘, but ‗that action to protect human health

and to reduce the risks to affected communities should occur without delay‘. The UNEP Report

recommends, amongst other proposals, to create an ‗Ogoniland Environmental Restoration Authority‘,

an ‗Environmental Restoration Fund for Ogoniland‘, a ‗Centre of Excellence for Environmental

Restoration‘, and to ‗declare the intent to make the wetlands around Ogoniland a Ramsar site‘.143

The

amount required to proceed with the UNEP recommendations will exceed $1 billion (which figure has

been calculated in respect of the ‗preliminary cost estimate for the first five years of restoration‘).144

Following the release of the Report, the value of Shell‘s stock dropped over 14.66 per cent.145

3.2.2 Shell: general facts and policies

Royal Dutch Shell plc. is the parent company of the Shell group, one of the world‘s leading energy

brands, active in exploration, exploitation and the sale of oil and gas (upstream and downstream),

hereinafter: the Shell Group. The Shell Group has worldwide operations: it employs around 97,000

people in over 90 countries. The ‗Royal Dutch Shell PLC Annual Report and Form 20-F for the year

ended December 31, 2010‘ (hereinafter: Shell Annual Report) provides information on the Shell

Group including the Consolidated Financial Statements. 146

The plc. is Shell‘s parent company and is

incorporated and registered in the United Kingdom. The physical and tax headquarters of Shell are

located in The Hague in the Netherlands. The Shell Group sees itself as one corporate group that

manages one business organisation; i.e. it is a real multinational company. It uses one brand name for

all of its products and operations, ‗Shell‘, it has one corporate communication strategy and group

business principles, it issues one set of consolidated financial statements and one ‗Sustainability

Report‘147

, it has one board of directors taking pride in managing the whole group as appears in the

annual general meetings of shareholders. The Consolidated Financial Statements affirm this picture of

the multinational company Shell, stating:

Royal Dutch Shell plc. and the companies in which it directly or indirectly owns investments are separate and

distinct entities. But in this publication, the collective expressions ‗Shell‘ and ‗Shell Group‘ may be used for

convenience where reference is made in general to those companies. Likewise, the words ‗we‘, ‗us‘, ‗our‘ and

‗ourselves‘ are used in some places to refer to the companies of the Shell Group in general.

143

UNEP Report, pp. 225-231. See also the Convention on Wetlands (Ramsar, Iran, 1971). 144

UNEP Report, p. 227. 145

Information on Royal Dutch Shell PLC (RDSB.L); at:

http://uk.finance.yahoo.com/echarts?s=RDSB.L#symbol=rdsb.l;range=20110801,20110808;compare=;indicator

=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=; accessed on 8 August 2011. 146

The Shell Annual Report states: “This Report serves as the Annual Report and Accounts in accordance with

UK requirements and as the Annual Report on Form 20-F as filed with the US Securities and Exchange

Commission (SEC) for the year ended December 31, 2010, for Royal Dutch Shell plc (the Company) and its

subsidiaries (collectively known as Shell). It presents the Consolidated Financial Statements of Shell and the

Parent Company Financial Statements of Shell.‖ It is at:

http://www.annualreportandform20f.shell.com/2010/servicepages/downloads/files/all_shell_20f_10.pdf,

accessed on 6 August 2011. 147

Royal Dutch Shell PLC Sustainability Report 2010 (hereinafter: ‗Shell Sustainability Report‘), at:

http://sustainabilityreport.shell.com/2010/servicepages/downloads/files/all_shell_sr10.pdf , accessed on 8 August

2011.

24

Hence, in this article, the terms ‗Shell‘ and ‗Shell Group‘ are used to refer to the group or to one or

more of the Shell Group companies, as the case may be.

Shell shares and American Depositary Shares (ADSs) are listed at the stock exchanges in Amsterdam,

London, and New York.148 According to the ‗Consolidated Statement of Income and of

Comprehensive Income Data‘ of the ‗Shell Group Summary Consolidated Balance Sheet‘, the

Revenue over 2010 totalled $368 billion and the ‗Income attributable to Royal Dutch Shell plc.

shareholders‘ exceeded $20 billion. Total assets per 31 December 2010 were $322.6 billion and total

debt was $44.3 billion. The ‗Equity attributable to Royal Dutch Shell plc. shareholders‘ was $148

billion USD, as communicated in the ‗Consolidated Balance Sheet Data‘. Total shareholder return in

2010 was 17 per cent (that is, the difference between share prices at the beginning and end of a book

year plus dividends delivered during the calendar year.)149 Basic earnings per were $3.28 in 2010.150

The share price in € closed at €24.73 as per 31 December 2010.151

The brand and reputation of Shell are its most important assets, as it can be conferred from the risk

paragraph of the Shell Annual Report: ―An erosion of our business reputation would have a negative

impact on our brand, our ability to secure new resources, our licence to operate and our financial

performance‖.152

In order to protect its reputation, Shell has formulated ‘General Business Principles‘

and a ‗Code of Conduct‘ which govern how Shell and the individual companies have to conduct their

affairs. Shell expresses this:

We are judged by how we act - our reputation is upheld by how we live up to our core values honesty, integrity

and respect for people. Our eight Business Principles are based on these core values and indicate how we

promote trust, openness, teamwork and professionalism.153

Shell states that it is a challenge to ensure compliance with these requirements by all employees and

that

failure – real or perceived – to follow these principles, or other real or perceived failures of governance or

regulatory compliance, could harm our reputation. This could impact our licence to operate, damage our brand,

harm our ability to secure new resources, limit our ability to access the capital market and affect our operational

performance and financial condition.154

All Shell companies, joint venture partners and (sub)contractors are expected to comply with the Shell

General Business Principles.155

CSR is based on the commonly accepted assumption that corporate

reputation is based on good performance in all three fields of Planet, People and Profit.156

Shell

communicates in this line as is demonstrated by their General Business Principles. For example,

Principle 5 expresses Shell‘s ambitions regarding ‗Health, Safety, Security and the Environment‘:

Shell companies have a systematic approach to health, safety, security and environmental management in order

to achieve continuous performance improvement. To this end, Shell companies manage these matters as critical

business activities, set standards and targets for improvement, and measure, appraise and report performance

externally. We continually look for ways to reduce the environmental impact of our operations, products and

services.157

148

Ibidem, p. 88. €0.07 is the nominal value of the ordinary shares. 149

Ibidem, p.8. 150

Ibidem, p. 98. 151

Ibidem, p. 90. 152

Ibidem, p. 13. 153

See Shell website, ‗Shell Code of Conduct: Your Responsibility‘, at: http://www-

static.shell.com/static/aboutshell/downloads/who_we_are/code_of_conduct/code_of_conduct_english_2010.pdf,

accessed on 13 July 2011. 154

See Shell website, ‗Shell General Business Principles © Shell International Limited 2010‘; at: http://www-

static.shell.com/static/aboutshell/downloads/who_we_are/sgbps/sgbp_english.pdf, accessed on 13 July 2011. 155

Idem. 156

See for example . Tulder van, R. and van der Zwart, A. (2006), International Business-Society Management –

Linking Corporate Responsibility and Globalization, Routledge: Abingdon (UK). 157

Idem.

25

Principle 6 testifies of the ambition to perform well in respect of ‗Local Communities‘:

Shell companies aim to be good neighbours by continuously improving the ways in which we contribute directly

or indirectly to the general wellbeing of the communities within which we work. We manage the social impacts

of our business activities carefully and work with others to enhance the benefits to local communities, and to

mitigate any negative impacts from our activities (...). Shell companies recognise that regular dialogue and

engagement with our stakeholders is essential. We are committed to reporting of our performance by providing

full relevant information to legitimately interested parties, subject to any overriding considerations of business

confidentiality. In our interactions with employees, business partners and local communities, we seek to listen

and respond to them honestly and responsibly.

Shell indicates in its Sustainability Report 2010 that the CEO proudly signed the ―Global Compact

LEAD initiative‖ and that Shell was a founding member of the Global Compact in 2000.158

Shell also

stresses that it has been an active supporter of the VPSHR since 2000 and that all new security

contracts now contain a clause on these principles.159

Shell further states that it supports the following

external voluntary initiatives: the OECD Guidelines; the Extractive Industries Transparency Initiative

(EITI) Statement of Principles and Agreed Actions; the Transparency International Business

Principles on Countering Bribery (2002); The World Economic Forum ‗Principles for Countering

Bribery‘ (2004); the ILO Core Conventions; and the UDHR.160

3.2.3 Shell and the Ruggie Framework

The Shell Sustainability Report declares that Shell contributed to the work of Ruggie161

and the Shell

website has a heading referring to the ‗UN Special Representative‘, stating:

We have worked closely with Professor John Ruggie who was appointed UN Special Representative on business

and human rights as he developed the Protect, Respect and Remedy framework. In March 2011, Professor

Ruggie released "Guiding Principles for the Implementation of the United Nations 'Protect, Respect and Remedy'

Framework.162

Shell‘s traditional home base is the Netherlands. This small country also hosts a number of active

NGOs such as Amnesty Netherlands, Greenpeace Netherlands and Greenpeace International,

Milieudefensie, that is the Dutch chapter of Friends of the Earth, and SOMO.163

All of them keep an

eye on the contributions of Shell towards sustainable development, and in particular they have an

interest in Shell‘s behaviour regarding human rights and the environment. Campaigns against Shell

have often been organised. Besides civil society organisations, Dutch leftish political parties demand

also attention for human rights and environmental protection. They do this through proposing laws,

posing questions to the cabinet, and by adopting motions. They are also eager to advocate CSR. In this

158

Shell Sustainability Report, supra note 147, pp. 1 and 7. 159

Idem, p.7. See also:

http://www.shell.com/home/content/environment_society/society/human_rights/international_initiatives/ and

http://www.shell.com/home/content/environment_society/reporting/external_voluntary_initiatives/, accessed on

8 August 2011. 160

Shell website, ‗External Voluntary Initiatives‘, at:

http://www.shell.com/home/content/environment_society/reporting/external_voluntary_initiatives/, accessed on

8 August 2011. 161

Shell Sustainability Report, supra note 147, p.1 (‗Introduction from the CEO‘). 162

See Shell website at:

http://www.search.shell.com/search?__utma=32229756.1915441974.1269962577.1269962577.1310127706.2&_

_utmb=32229756.4.9.1310127758855&__utmc=32229756&__utmx=-

&__utmz=32229756.1310127706.2.1.utmcsr%3Dgoogle%7Cutmccn%3D(organic)%7Cutmcmd%3Dorganic%7

Cutmctr%3Droyal%2520dutch%2520shell%2520ruggie&__utmv=-&__utmk=7261488, accessed on 8 July

2011. 163

SOMO is ‗an independent, non-profit research and network organisation working on social, ecological and

economic issues related to sustainable development‘. See: http://somo.nl/about-

somo/mission/view?set_language=en, accessed on 20 July 2011.

26

context, a one-day public hearing on CSR practices of Dutch Multinationals operating in West-Africa

('Maatschappelijk verantwoord ondernemen in West-Afrika') was organised by the Dutch Parliament

on 26 January 2011.164

In actual fact, the hearing was set up to discuss Shell‘s operations in Nigeria, to

address the question to what extent Shell is complying with the norms set out in the Ruggie

Framework, and to find out how this can be improved. Questions regarding remediation of oil spills,

how to respect human rights and how to prevent corruption, were posed to high executives of Shell by

approximately 15 Members of Parliament (from left to right wing).165

Furthermore, experts in the

fields of CSR and oil exploration were heard as well as various of Nigerian and Dutch NGO

representatives. The Shell executives stressed that the conditions in Nigeria were particularly harsh.

Questions that appeared difficult for them to answer concerned matters of how Shell was making use

of its bargaining power in its contacts with Nigerian politicians and authorities, that is just to affirm its

economic rights or also to encourage the Nigerian counterpart of the necessity of implementing a

sustainable development and fighting corruption? The MPs and experts suggested that Shell could

provide transparency about these contacts, but this was firmly rejected by the Shell executives, who

stipulated that this would not be in their commercial interest.166

Other questions which were apparently

difficult for the executives to answer were those regarding court cases. Nigerian people have submitted

tort claims in court demanding from Shell remediation of the environment and compensation for oil

pollution and also that gas flaring has to stop. The MPs put forward the outcome of various Nigerian

court cases, in which Shell was sentenced for the pollution, and/or was ordered to stop the gas flaring,

they asked why Shell is delaying performance. Shell‘s position in regard to Nigerian court sentences is

usually that it lodges appeals, delays paying fines, or does not comply with them labeling them

unfair.167

As shown in subsequent newspaper and blog discussions, not everyone in the audience felt

satisfied with the explanation by Shell executives claiming that Shell has the right to defend itself in

court, to use all possible legal formal defences, and to appeal whenever it has lost a case.168

Another

matter concerned the question of whether Shell is prepared to share the results of environmental and

human rights assessments with the local communities. A similar issue relates to fact finding missions

in case of oil spills. Whereas the CSR experts in the hearing advocated joint fact finding and the

sharing of results, the Shell executives and Shell representatives in the audience explained that this

would not be (fully) possible because of commercial reasons.169

164 Tweedo Kamer, Agenda Economische Zaken, Landbouw en Innovatie 26 January 2011, MVO in West-

Africa, at:

http://www.tweedekamer.nl/vergaderingen/commissievergaderingen/volgende_weken/details.jsp?parlisnummer=

2010A04095&dayofweek=Woensdag&his=1, accessed on 7 August 2011. One of the experts in the field of

CSR, dr. T.E. Lambooy, was asked among other questions about the application of the Ruggie framework. She

elaborated in her answer on possible remediation mechanisms and on joint fact finding. See for example, Twitter

Sjoera Dikkers (Partij van de Arbeid) 26 januari 2011, ―Dr Lambooy: Shell moet transparant zijn en

verifieerbare data aanleveren. Mee eens. Hebben we daar wetgeving voor nodig? Wellcht.‖, at:

http://publitiek.nl/!sAC, accessed on 7 August 2011. See for a general news item about the hearing:

http://nos.nl/video/214429-shell-aan-de-tand-gevoeld-over-nigeria.html, accessed on 4 August 2011. Friends of

the Earth International, News Item 25 January 2011, ‗Shell under scrutiny for Nigerian situation again‘; at:

http://www.foei.org/en/media/archive/2011/shell-under-scrutiny-for-nigerian-situation-again/?searchterm=shell,

accessed on 6 august 2011. 165

For example,mr. P. de Wit, president director Shell Nederland, and mr. I. Craig, executive vice-president Shell

Sub-Saharan Africa. 166

Idem. 167

Similar arguments were communicated by Chevron about the Ecuadorian judiciary, as was observed in

section 3.1 above. 168

Liesbeth van Tongeren (GroenLinks) specifically asked about the Nigerian judgement of 5 July 2010 in

which Shell was ordered to pay $10 million for a clean-up operation somewhere in Nigeria. The executives

informed the audience that they had not yet become aware of that judgement: ‗This came up yesterday and we

had not much time to look into it‘. And ‗We will do what is reasonable. We think that this judgement is wrong

and we will appeal, like any individual would do‘. Compare the judgement of a Nigerian court (2006) imposing

a sanction on Shell to pay a compensation to local people who had suffered from oil spillage, which judgement

Shell has appealed and so far refused to pay the fines. See Lambooy, Rancourt, loc.cit. (note 138), pp.251-253. 169

Shell‘s position here is a very legalised position: Shell‘s argument is usually that sharing those facts and

results would limit possible defences of Shell in subsequent court proceedings. See also below, section 3.2.5

27

3.2.4 Oil spills in Nigeria - remediation according to Shell

Shell operated for decades in Nigeria, both onshore and offshore, accounting for approximately 9 per

cent of Shell‘s total production. In Nigeria, operations are performed by Shell Petroleum Development

Company of Nigeria Limited (SPDC).170

SPDC is the largest oil and gas company in Nigeria. It is the

operator of a joint venture between the government-owned Nigerian National Petroleum Corporation –

NNPC (55%), SPDC (30%), Total Exploration & Production Nigeria Limited – a subsidiary of Total

(10%), and Nigerian Agip Oil Company Limited (5%). SPDC‘s operations are in shallow water and

onshore in the Niger Delta spread over 30,000 square kilometres. They include a network of more than

6,000 kilometres of flowlines and pipelines, 86 oil fields, 1,000 producing wells, 68 flowstations, 10

gas plants and two major oil export terminals at Bonny and Forcados. The company is capable of

producing an average of over one million barrels of oil equivalent per day (boe/d).171

As briefly mentioned in section 3.2.1, since the beginning of the 90s, many complaints have been

lodged by local communities about oil pollution of soil and water ways, especially regarding the

operations in the Ogoni river delta in the south eastern part of Nigeria. Gas flaring is another subject

that has caused many complaints from the Delta inhabitants, later supported by NGOs. In the 90s,

protests were led by Ken Saro Wiwa; later on, protests took a more violent course and were asserted

by the MEND and other organisations.172

As has been explained in the UNEP Report discussed above, oil spills harm the environment, impact

livelihoods, and waste valuable resources. Oil spills can be caused by operational failure, that is spills

due to corrosion, human error, and equipment failure, but can also result from sabotage. According to

Shell, more than 80 per cent of spill volume from SPDC facilities in the Niger Delta in 2010 resulted

from sabotage or leaks caused when thieves damaged pipelines and wellheads. They are costly to

clean up. Shell states that some communities delay SPDC teams from accessing spill sites to stop the

leak and start cleaning up: ―Sometimes they do this because they are angry or worried about the

impact on their land and lives. Others want clean-up contracts and extract greater compensation.

Whatever the reason, the volume of a spill is often made significantly greater as a result.‖173

The Shell website states that SPDC is ―committed to minimising oil spills to the environment and to

cleaning up all spills in the Niger Delta when they occur, as fast as possible, no matter what their

cause.‖174

Shell asserts that the SPDC facilities and pipelines are operated to the highest international

standards, certified annually to ISO14001 standard, and publicly report oil spill statistics to further

transparency.175

The statistics are supposed to track the progress of the spill response from when Shell

learns about the leak to when clean-up is completed and signed off. Moreover, the Shell Nigeria

website states that a so-called ‗Joint Inspection Visit‘ team (JIV) visits the site, as quickly as possible

after the leak occurs. JIV is led by SPDC experts and includes representatives of the Nigerian

about the court proceedings in the Netherlands in which the claimants have demanded document disclosure from

Shell, which Shell so far still opposes. 170

See Shell website: ‗The Shell Petroleum Development Company of Nigeria Limited (SPDC)‘, at: http://www-

static.shell.com/static/nga/downloads/pdfs/briefing_notes/shell_interests.pdf, accessed on 13 July 2011. 171

Idem. 172

Lambooy, Rancourt (2008), loc. cit., note 138; Amnesty Report 2009, loc. cit, note 138; the Erratum; Friends

of the Earth gas flaring campaigns and court case in the Netherlands which commenced in 2008, loc. cit., note

138 (see below section 3.2.5). 173

Shell uses different figures when referring to spills caused by sabotage: sometimes 80 per cent, at other places

75, 70 or even 95. See Shell website, Home/Environment & Society/Society/Nigeria/Spills in Nigeria, at

http://www.shell.com.ng/home/content/nga/environment_society/respecting_the_environment/oil_spills/; and

http://www.shell.com/home/content/environment_society/society/nigeria/spills/; both accessed on 13 July 2011.

See also the UNEP Report 2011. 174

See Shell website: http://www-

static.shell.com/static/nga/downloads/pdfs/briefing_notes/env_perf_oilspills.pdf

Environmental Performance-Oil Spills, accessed on 13 July 2011. 175

In January 2011, SPDC launched a website that contains data on oil spills, including weekly progress updates,

investigation reports and photographs. See Shell website: ‗Spill Incident Data‘, at:

http://www.shell.com.ng/home/content/nga/environment_society/respecting_the_environment/oil_spills/monthly

_data.html, accessed on 8 August 2011.

28

Department of Petroleum Resources (DPR), the National Oil Spill Detection and Response Agency

(NOSDRA), the relevant State Ministry of the Environment, and the police, as well as representatives

of impacted communities. The JIV has to determine the spread, volume and cause of the spill in order

to provide transparency. According to Shell, where the investigation shows that the spill was within

SPDC‘s control to prevent, SPDC negotiates compensation with the affected landowners: ―In 2010,

SPDC paid more than $1.7 million in compensation. Nigerian law does not require payment of

compensation in cases of sabotage.‖ SPDC‘s spill response team makes the necessary repairs and

recovers as much of the spilled oil as possible. This is called the clean-up. After the clean-up, there can

still be residual oil that has soaked into the soil, or oil sticking to vegetation. A post clean-up

inspection, involving representatives from the same parties listed for JIVs, assesses whether the site

needs further remediation to comply with international standards. Remediation is a process aimed at

returning the site to its previous state.176

If remediation is not required, then the spill site can be

certified clean and the incident closed out.177

Shell informs through its Shell Nigeria website that SPDC and its joint venture partners invest in

social projects and programmemes in communities primarily in the Niger Delta. As of 2006, several

‗Global Memoranda of Understanding‘ (GMoU) have been concluded, placing emphasis on more

transparent and accountable processes, regular communication with the grassroots, sustainability and

conflict prevention.178

In the following sections, the corporate responses of Shell to claimants who have asserted that they are

victims of oil pollution will be presented. In the last section 3.2.9 we will explore which way the

company puts its ambition into practice to provide remedies to victims in connection with its ambition

to respect human rights.

3.2.5 Oil spill litigation in the Netherlands

This section will analyse the corporate response of Shell in the litigation that is currently going on in

the Netherlands and in which Shell is held accountable by villagers suffering from oil pollution.

In 2009, three separate cases of oil pollution in the Ogoni Delta have found their way to a Dutch court.

Farmers in the three villages: Oruma, Goi and Ikot Ada Udo, have alleged that they suffer from oil

pollution from Shell installations. The cases have been supported by the Dutch NGO Milieudefensie

(Friends of the Earth Netherlands) and the NGO Friends of the Earth Nigeria. The legal proceedings

were commenced against Shell Nigeria (the operating company) and Royal Dutch Shell plc. (the

parent company). See Chart 3.2.5.

176

See Shell website, ‗Remediation Issues in the Niger Delta‘, at:

http://www.shell.com.ng/home/content/nga/environment_society/respecting_the_environment/remediation/;

accessed on 13 July 2011. Shell indicates that there are three methods of remediation in use for land spills:

‗Remediation by Enhanced Natural Attenuation‘ (RENA), 'Remediation by Stabilization/Solidification‘ and

‗Low Temperature Thermal Desorption‘. The RENA technique is the predominant method in use and may be

applied in-situ (treating the soil on site) or ex-situ (removing the soil to be cleaned elsewhere and returned site).

Remediation in swampy terrain depends on the nature of swamp, whether seasonal or perennial. A seasonal

swamp is dry during the dry season and holds water during rainy season. Remediation of the impacted soil can

be undertaken using RENA method in the dry season. In perennial swamps, free phase oil on water and

vegetation is cleaned by flushing and skimming whilst oily sludge is remediated by systematic agitation using

swamp buggies coupled with application of suitable nutrient amendment to promote biodegradation and other

natural attenuation processes. After completion of the remediation process, the site is handed over for close-out

inspection and certification by the relevant Government agencies. The entire spill response process is governed

by performance standards, as prescribed by Nigerian Law, in particular as defined in the DPR EGASPIN 2002

(Department of Petroleum Resources – Environmental Guidelines and Standards for the Petroleum Industry in

Nigeria). This standard is applied to all spills, regardless of the cause. 177

Idem. According to Shell, in 2010, 270 sites were certified. 178

See Shell website, ‗A new way of working with communities‘ at: http://www-

static.shell.com/static/nga/downloads/pdfs/briefing_notes/gmou.pdf, accessed on 13 July 2011.

29

Chart 3.2.5. (source: subpoena Dooh, inhabitant of Goi, p. 7)

According to the claimants, they have been protesting against Shell in Nigeria for decades about the

systematic pollution but that this has turned out to be ineffective.179

In May 2008, claimants filed a

formal liability claim. In a written response in June 2008, Shell denied any wrongdoing and denied

that the Shell holding is responsible for the events in Nigeria. It asserted that Royal Dutch Shell plc. is

a publicly listed holding company and had ‗no direct involvement in the operations of its

subsidiaries‘.180

In November 2008 and May 2009, the Nigerian claimants served various subpoenas

which describe the charges against Shell for the leakages in respectively Oruma, Goi and Ikot Ada

Udo, and command Shell to appear before the District Court in The Hague, the Netherlands.

The first response of Shell was to contest the jurisdiction of The Hague court over Shell Nigeria

(„exceptie van onbevoegdheid‟)181

. Basically, Shell states that Shell Nigeria is a Nigerian company and

thus not required to appear before a Dutch court, because of insufficient nexus.182

Shell also asserts

179

Court Document ‗Dagvaarding‘ [subpoena] Dooh, pp. 14-17. See also: ‗Factsheet. The people of Nigeria

versus Shell: The case: step by step‘, at: http://milieudefensie.nl/publicaties/factsheets/factsheet-the-people-of-

nigeria-versus-shell-timeline-shell-courtcase. The full history and all court documents filed in the three cases are

accessible on www.shellcourtcase.org and www.milieudefensie.nl/english/shell/the-peopleof-nigeria-versus-

shell; accessed on 13 July 2011. See also the video of Eric Dooh, whose father is one of the claimants, discussing

strategy with the claimants‘ lawyer before a court session, 19 May 2010, ‗Nigeriaanse boer voor rechtbank

tegen Shell‘, at: http://nos.nl/artikel/241613-nigeriaanse-boer-voor-rechtbank-tegen-shell.html, accessed on 6

August 2011. 180

Shell letter of 20 June 2008, cited by claimants in the Dooh subpoena on p. 36 (www.shellcourtcase.org). 181

The Shell Oruma case defence dated 13 May 2009; the Goi and Ikot Ada Udo case defences dated 28 October

2009; all at: www.shellcourtcase.org. 182

See, for example, the Shell Oruma case defence (Incidentele conclusie houdende exceptie van onbevoegdheid,

tevens voorwaardelijke conclusive van antwoord in de hoofdzaak) dated 13 May 2009, pp. 64; at:

www.shellcourtcase.org and http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-

shellrechtszaak#juridischedocumenten, in which Shell states that a Dutch court is not competent because there is

no connection between (i) the claims based on oil pollution in Nigeria with only local impact and (ii) the UK

company Shell, and that there is no connection with Dutch legal sphere. This defence is comparable with the

‗forum non conveniens‟ defences before a UK or US court. Generally, regarding a tort claim which encompasses

international elements, the Dutch conflict of law rules will determine (i) whether the Dutch court is competent to

decide on the matter and (ii) whether Dutch law will be applied in the case. In this regard, Dutch conflict of law

rules are predominantly governed by EU law, i.e. the EEX and Rome II Regulations. Generally, a Dutch court

30

that Nigerian law should be applicable. It further argues that the claimants abuse Dutch procedural law

(„misbruik procesrecht‟) by commencing a claim against Royal Dutch Shell plc., because the grounds

are ‗evidently insufficient‘. According to Shell, the parent company is not responsible because it is

only a shareholder and has no direct involvement in the operations of its subsidiaries. The position

brought up by the Nigerian claimants and Milieudefensie is that the multinational company Shell

operates as a single economic unit and it is therefore lawful to jointly try both companies Shell Nigeria

and the Dutch headquarters in the Netherlands in the proceedings. Moreover, according to Shell, the

NGO Milieudefensie cannot act as claimant and therefore the court is incompetent to hear its claim,

because the right to collective action as provided for in Article 3:305a Dutch Civil Code (DCC, see

section 3.2.6) is only applicable in cases where Dutch law applies.183

The Dutch court did not follow

Shell‘s arguments on the jurisdiction questions and ruled in an intermediate judgment that it is

competent to decide on Shell Nigeria, that there is no abuse of Dutch procedural law, and that

Milieudefensie can be a claimant.184

In the Ikot Ada Udo case, Shell not only contested the jurisdiction of the court, but also brought up

that this case could only be tried after other cases there were pending in Nigeria concerning the same

oil leak would have been settled.185

This concerned a case in which a number of villagers from Ikot

Ada Udo, who are not claimants in the case in The Hague, have been claiming compensation before a

Nigerian court. However, the Dutch court rejected the defence.186

Moreover, Shell uttered that Royal Dutch Shell plc. came into existence only in 2005 and cannot be

held accountable. It was incorporated to unify the two top holdings that headed the Shell concern until

than (that is: N.V. Koninklijke Nederlandse Petroleum Maatschappij and The ―Shell‖ Transport and

Trading Company plc.).187

Because of this formal defence, the claimants have decided to bring the

former two parent companies also into the litigation.

The next line of defence of Shell is that (most of) the oil spills were caused by third parties, such as oil

bandits and through sabotage.188

The claimants‘ allegations assert that even if third parties played a

role in causing the spills, it was still Shell‘s duty to protect its pipes and installations.189

Furthermore,

the Shell defence contends that the villagers have to blame themselves because if they help with the

cleaning up and don‘t perform well, they should not complain. In the Oruma case, Shell also states that

village did not give permission for remediation on leakage, whereas the claimants maintain that Shell

has its own entree route, and does not need permission. In respect to the damage, Shell generally utters

that this is not as large as the villagers claim and that after cleaning up there is no damage anymore.

The claimants‘ position is that the pollution still hampers their way of living from fish and other

animals from the creeks and ponds.

will consider itself competent to judge a tort claim against a parent company of a multinational company to the

extent that this company is registered, domiciled or has its headquarters in the Netherlands. Compare infra

Enneking et al.(note 197) 183

Idem,pp. 33-42. 184

Judgment in the Oruma case in motion contesting jurisdiction of 30 December 2009, at:

http://milieudefensie.nl/publicaties/bezwaren-uitspraken/judgment-courtcase-shell-in-jurisdiction-motion-oruma;

in the Goi and Ikot Ada Udo cases the judgments were rendered in spring 2010. The judgments are available at:

www.shellcourtcase.org and http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-

shellrechtszaak#juridischedocumenten. See, for example Rechtbank 's-Gravenhage, Vonnis in het

bevoegdheidsincident 24 Februari 2010; at: http://nl.vlex.com/vid/-198191847, accessed on 7 August 2011. 185

That is, the ‗lis pendis‘ question; Shell defence dated 28 October 2009, at: www.shellcourtcase.org and

http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-shellrechtszaak#juridischedocumenten. 186

Decision 2 December 2010;at:www.shellcourtcase.org and

http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-shellrechtszaak#juridischedocumenten. 187

Supra, the Shell Oruma case defence, pp. 6-7, 48-58, at :www.shellcourtcase.org and

http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-shellrechtszaak#juridischedocumenten,

accessed on 14 August 2011 188

Idem, pp. 3-4, 24-32. 189

Supra, subpoena Dooh, pp. 22-34 and 58-72, at :www.shellcourtcase.org and

http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-shellrechtszaak#juridischedocumenten,

accessed on 14 August 2011.

31

Furthermore, the claimants explain what the duty of care is of the parent company, in respect of

preventing and remediating oil spills.190

As a defence, Shell refers to Dutch and Nigerian corporate

law.191

Shell emphasises that Nigerian law adheres to the ‗separate entity doctrine‘ and that the parent

company can only be liable if the doctrine of piercing the corporate veil is applicable. However, the

claimants‘ allegations are that the parent company has an own duty of care regardless of any piercing

the corporate veil theory. Their position is that Shell operates as a multinational company, that is the

parent company owns directly or indirectly 100 per cent of the subsidiaries‘ shares and it can govern

their practices in formal and informal ways. There are many instruments to control the international

operations, for example by appointing and dismissing directors but also through company policies and

personal contacts.192

Under Dutch law, a holding company can he held liable for its own acts,

omissions and conduct, where useful together with one or more of its group companies. The tort

standard will be whether the company has fulfilled its duty of care in respect of the victims abroad.

Tort liability requires (i) a breach of a duty of care, (ii) relativity, (iii) causality (relevant is the

„conditio sine qua non‟ question: would the damage suffered by the victim have occurred if the act or

omission had not taken place?), (iv) accountability (culpability for its own intentionally conducted or

omitted act), and (v) damages. Claimants have to raise these five elements and prove them. As to the

duty of care, the criterion is whether the company had known or reasonably should have known that its

act or omission could have led to the damage in question. A lack of supervision can, for example,

qualify as an omission. There is no substantial Dutch case law in the area of CSR claims against a

multinational company. Clearly, these norms are being influenced by the international legal and semi-

legal developments in this field such as the Ruggie GP and the revised 2010 OECD CSR Guidelines,

and by the best practices that the company at hand exposes (such as adhering to sector codes of

conduct and international frameworks such as the ISO 26000 process guidelines).193

This is mainly

also what has been argued by the claimants.194

No decision on any of these substantive matters has yet

been delivered (mid 2011). It is not expected before mid-2012.

The principal rule of evidence under Dutch law is that the claimants have to prove their allegations and

demonstrate the facts that support the allegations. There is no limitation regarding the type and

quantity of means that can constitute evidence. Occasionally, a court may decide to give the defendant

an aggravated burden to motivate his defence. Witnesses can be heard during trial and/or written

testimonies can be submitted. Witnesses can be forced to testify. In the situation where the witnesses

live abroad, the Dutch court can submit a request to the pertinent foreign court to hear the witnesses.

The parties themselves can also be heard, either at their own request or at the request of the other

party. Additionally, experts can be asked to draw up reports in three cases, briefs have been submitted

on behalf of claimants and defendants in 2010 and all parties will get a chance to present oral

arguments, possibly late 2011, after which the court can take a decision. It is possible that an appeal to

a higher court will follow the court‘s verdicts.195

Another issue in these cases is that the claimants‘ lawyer has expressed the difficulty in finding public

information on the division of tasks and responsibilities between the Nigerian group companies and

190

Idem, pp. 49-56. 191

Supra, the Shell Oruma case defence, p. 63. 192

Supra, subpoena Dooh, pp. 37-49. 193

See for overview of evolving norms in this field Lambooy, T.E., ‗Corporate due diligence as a tool to respect

human rights‘, NQHR, Vol. 28, 2010(3), pp. 404-448. See also: Enneking et al. 2011, infra note 197: ―Dutch law

provides for a limited number of situations in which a tort claim does not need to be based on culpability but can

instead be based on a certain quality or situation, the so-called ‗strict liability‘, for example parental liability for

the acts of minor children, employers‘ liability for certain acts of their employees and the liability of the owner

of a building or land for damage caused thereby. The question has emerged whether an MNC‘s holding company

should acquire a certain form of strict liability for human rights violations by any one or more of its group

companies.‖ 194

Supra note 88, subpoena Dooh, pp. 49-56. 195

Briefs are at: http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-

shellrechtszaak#juridischedocumenten.

32

the parent company of Shell.196

Neither Shell‘s Annual Report nor the individual group companies‘

accounts provide clear guidance on these issues. Chambers of Commerce, keeping a register of legal

entities in their territory, hold information concerning directors and shareholders; however, even on

that basis it generally remains very difficult to uncover a clear picture of ownership, governance, and

control lines in respect of a parent company and the worldwide corporate network. For the claimants,

it is important to find out which legal entity committed certain acts or failed to take action (an

omission to act can also lead to the tort qualification under Dutch law). This is critical as ‗group

liability‘ or ‗enterprise liability‘ as such does not exist under Dutch law, that is even with respect to an

multinational company as the law stands today the alleged tort(s) has to be attributed to a distinct legal

entity or entities.197

The information requested by the claimants is furthermore important when one

wants to demonstrate that the parent company has not executed sufficient governance and control over

its Nigerian subsidiary‘s activities, and hence has violated its duty of care and thus committed a tort

towards the victims of the subsidiary‘s practices.

Furthermore, the claimants felt the need to request certain factual information regarding the oil

spills and cleaning operations. As it was apparently difficult to obtain this information from Shell, the

claimants asked the court to order Shell to give such information.198

The UK respectively US doctrines

of ‗pre-trial discovery‘ or ‗document disclosure‘199

(see below section 3.3), are not part of Dutch

law.200

Theoretically, it is however possible to obtain information to a limited extent on the basis of the

Dutch civil procedure law (exhibitie plicht, article 843a Dutch Code of Civil Procedure). The

requirements follow from the Code and case law. In practice, it appears difficult and sometimes

impossible to obtain documents that are in the possession of opponents who are unwilling to submit

them. The requesting party must (i) have a legitimate interest, which will only be the case where an

evidential interest exists; (ii) specify the desired documents in sufficient detail so that it is possible to

determine which documents are meant and why the requesting party has a legitimate interest in them

(this condition is designed to prevent so-called ‗fishing expeditions‘ which is common practice in

American litigation. This is particularly relevant when considering BP‘s engagement in the settlement

process: it may consider it a benefit due to the ability to hide potentially damaging documents. For

example, if there existed internal memoranda regarding ‗acceptable‘ safety risks it could be

catastrophic); and (iii) the documents must ‗relate‘ to a legal relationship (based on contract or tort) to

196

Lectures Michel Uiterwaal, the claimant‘s lawyer, 23 June 2009, seminar organised by NJCM and Stand Up

For Your Rights on ‗human rights and business‘. See: http://www.njcm.nl/site/events/show/90;

http://media.leidenuniv.nl/legacy/Voorlopig_Programmema_23juni09.pdf; accessed on 6 August 2011. 197

See L.F.H. Enneking, I. Giesen, M.J.C. van der Heijden, T.E. Lambooy, M.L. Lennarts, Y. Visser,

„Privaatrechtelijke handhaving in reactie op mensenrechtenschendingen door internationaal opererende

ondernemingen‟, Nederlands Tijdschrift voor de Mensenrechten (NTM/NJCM-Bulletin) [Netherlands Journal

for Human Rights],[ 2011-2 or 3, still to be checked]. Also concerning the (possible applicability of the) doctrine

of piercing the corporate veil, it should be noted that Dutch law is very reluctant in this regard, because the

identification of a parent company with its subsidiary company/companies does not sit well with basic notions of

corporate law, that is each company is regarded as a separate legal entity, with its own (limited) liability. Since

Dutch courts hardly accept this, it is more feasible to try to find the means to hold the parent company liable for

its own behaviour (and thus not for that of its subsidiary). Lack of good corporate governance and supervision

has been suggested as a possible ground for tortuous behaviour. This is also the line of the claimants in the three

cases. 198

Incidentele conclusie tot exhibitie inzake Oruma, 24 maart 2010, Rb DH,

http://milieudefensie.nl/publicaties/bezwaren-uitspraken/incidentele-conclusie-tot-exhibitie Oruma. The

claimants have requested 30 company documents, mainly concerning company policies on responding to oil

leakages and information about cleaning operations. See NOS news item 19 May 2011, ‗Nigeriaanse boer voor

rechtbank tegen Shell‘, at: http://nos.nl/artikel/241613-nigeriaanse-boer-voor-rechtbank-tegen-shell.html,

accessed on 6 August 2011; and http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-

shellrechtszaak#juridischedocumenten. 199

Federal Rules of Civil Procedure (2007), Rule 26 (incorporating the revisions that took effect on 1 December

2007). 200

Hooijdonk, M. van, and Eijsvoogel, P., Litigation in the Netherlands. Civil Procedure, Arbitration and

Administrative Litigation (Kluwer Law International: The Hague, 2009), pp. 25-26. Uittien, H. Gedwongen

verstrekking van due diligence-rapportages [Forced provision of due diligence reports], in Tijdschrift voor de

Rechtspraktijk [Journal for the law practice], 1 January 2007, pp. 19-23.

33

which it is a party.201

In the cases at hand, no decision has been issued on these matters by August

2011.202

Shell had requested the court to allow to it the right to appeal against any intermediate

judgement regarding the document disclosure request. The claimants have argued that this would lead

to delays in the main proceedings.203

They point at the revision of Dutch procedural law in 2002,

which aimed at handling court cases with more speediness and to render decisions on the substance.

The claimants state that the main rule is that appeal against intermediate judgments is not possible.

3.2.6 Collective action

Under Dutch law (article 3:305a DCC), a foundation or association, such as an NGO, has the right to

submit a tort claim provided that this concurs with the NGO‘s articles of association and that the NGO

has adequately attempted to achieve the same results as the ones claimed in amicable consultation with

the other party. Milieudefensie has based its standing in court on this article. According to them, these

requirements have been met. Financial compensation cannot be claimed, however. Another mode

under Dutch law is to negotiate a collective agreement on damages on behalf of more claimants, that is

the „Wet Collectieve Afwikkeling Massaschade‟ (Articles 7:907-910 DCC). This type of settlement

agreement can be submitted by claimants and defendants to the Appellate Court in Amsterdam. This

court can issue a declaration to make the settlement agreement binding in respect of all current and

future victims falling within a specified category of victims determined in the collective settlement

agreement (unless they select to be ‗opted out‘). Financial compensation is one option, though other

remedies can be included in such an agreement.

3.2.7 Complaint violation Shell of OECD Guidelines

On 25 January 2011, Amnesty International, Friends of the Earth International and Milieudefensie

submitted a complaint with the Dutch and UK National Contact Points (NCP) regarding breaches of

the OECD Guidelines by Royal Dutch Shell in relation to the Niger Delta.204

It relates to statements

made by Shell to consumers and other stakeholders in relation to the incidents in the Niger Delta.

Shell‘s repeatedly claims that between 70 per cent and 85 per cent and, most recently, 98 per cent of

oil spills in the region are due to sabotage committed by criminal gangs. These statements have serious

and negative implications for the communities of the Niger Delta. The claimants state that the data are

not based on impartial evidence gathering and that the figures are too high, arbitrary, incorrect,

misleading, and disputed. Despite repeated requests in the past, Shell has failed to make clear the basis

for the figures. The complaint charges that Shell has breached the OECD Guidelines, and in particular

the sections (i) Disclosure (III)(1)(2)(4(e)), because:

the company provides misleading information and omits mention of relevant facts about causes of oil spills.

Additionally, Shell bases its communications on biased and unverified information, thus failing to provide

reliable and relevant information to external stakeholders. Incorrect and conflicting messages about causes of oil

spills further contribute to low quality non-financial information.

201

Lambooy, CSR 2010, op.cit. pp. 330-331. As regards due diligence reports, there are examples of cases in

which the claimant was allowed to receive a copy. In BVR/Ho-Cla, a report prepared by a financial adviser for

the buyer of a company was concerned. The court considered this document to ‗relate to‘ the legal relationship

between the buyer and the seller as laid down in their Share Purchase Agreement (i.e. the third condition

mentioned above had been fulfilled). See: BVR/Ho-Cla, Den Bosch CoA 28 September 2004 (JOR 2005/23);

similarly: Verder Holding/Hagemeijer, Amsterdam District Court 13 April 2005 (JOR 2005/142); Aegon/Dexia,

Amsterdam District Court, 3 November 2004 (JOR 2004/326) concerning a request for due-diligence

documentation, which was rejected because it was not sufficiently specified and, firstly, the Court had to decide

on the scope of the information duty. 202

Expected on 14 September 2011. See: http://milieudefensie.nl/oliewinning/shell/olielekkages, accessed on 5

August 2011. 203

See Conclusie van repliek in het incident ex art 843a Rv, p. 35,at

http://milieudefensie.nl/oliewinning/shell/olielekkages/documenten-shellrechtszaak#juridischedocumenten. 204

The complaint is submitted under the ‗Specific Instance Procedure‘ of the OECD Guidelines (please note that

this concerns the Guideline version of 2000). The text of the complaint is available at:

http://www.foei.org/en/resources/publications/pdfs/2011/oecd-submission, accessed on 6 August 2011.

34

It is further contended that Shell‘s behaviour is in breach of (ii) Environment (V)(2)(3), which

provision states that enterprises should ―take due account of the need to protect the environment,

public health and safety, and generally to conduct their activities in a manner contributing to the wider

goal of sustainable development‖ and in breach of (iii) Consumer Interests (VII), stating that

companies should ―act in accordance with fair business, marketing and advertising practices,‖ and in

particular point 4 thereof requiring enterprises ―not to make representations or omissions, nor engage

in any other practices, that are deceptive, misleading, fraudulent, or unfair.‖ 205

The Dutch NCP carried

out an initial assessment of the notification and has accordingly determined that the issues raised merit

further examination. 206

The complaint was still pending at the moment of finalising this contribution

(September 2011).

3.2.8 Settlement negotiations Bodo oil spills

A recent development concerns a court case in the UK in which Nigerian farmers alleged that they

suffered from two massive oil leaks in 2008/9 from Shell operations which has caused devastating

damage to the environment, in particular to the areas' mangroves and waterways of the fishing

community of the Bodo Community in the Niger Delta.207

Tens of thousands of barrels of crude oil, at

an estimated rate of 2,000 barrels per day, leaked since August 2008, causing contamination to an

estimated area of 20 km2 in the Gokana Local Government Area of Rivers State in Nigeria (see map

3.2.§). Shell disputes that, saying that a weld broke in September 2008 in the 50-year-old trans-Niger

pipeline. Shell‘s position is that it was informed of the first leak in early October 2008. The

community‘s position is that the leak by then had already been pumping oil for some six weeks and

that it took Shell over a month to repair the pipeline defect. A further spill occurred in December 2008

and was also the result of equipment failure. It was not capped until February 2009, during which time

even greater damage was inflicted. According to oil spill assessment experts who have studied

evidence of the two spills on the ground and on film, more than 280,000 barrels may have been

spilled. Bodo is at the epicentre of several pipelines that collect oil from nearly 100 wells in the Ogoni

district and there have been plenty of minor spills in and around the communities over the years.

According to Centre for Environment, Human Rights and Development in Port Harcourt, these

particular spills hit an exceptionally sensitive ecosystem for a very long time; it spread with the tides,

and the health of people is at risk.208

Apparently, 80 per cent of the Bodo people here are fishermen or

they depend on the water. They have lost their livelihoods; hence the spills have caused serious

poverty. Social problems such as petty stealing and bunkering followed the environmental ones.209

The

205

OECD Complaint, pp. 12-13. 206

Letter of Mr. F. Evers, Chairman of the Dutch NCP dated 23 February

2011,at:http://www.oesorichtlijnen.nl/wp-content/uploads/doc000.pdf. 207

‘Shell accepts responsibility for oil spill in Nigeria‘, Fox Business, 3 August 2011, at

http://www.foxbusiness.com/markets/2011/08/03/shell-in-nigeria-settlement-talks-ahead-un-delta-

study/#ixzz1U3AUB6uE, accessed on 4 August 2011. See also the video of Eric Dooh, one of the local farmers

about the oil pollution in his village: http://nos.nl/video/241642-nigeriaanse-boer-wij-zijn-altijd-ziek.html,

accessed on 4 August 2011. John Vidal, ‗Shell oil spills in the Niger delta: 'Nowhere and no one has escaped'‘,

guardian.co.uk, 3 August 2011, at: http://www.guardian.co.uk/environment/2011/aug/03/shell-oil-spills-niger-

delta-bodo/print. This Is Money Reporters, ‟Shell clean-up bill after spill that pumped 2,000 of barrels of oil a

day into fishing areas of Nigeria‘, 4 August 2011,at: Read more:

http://www.thisismoney.co.uk/money/markets/article-2022259/Shells-clean-spill-pumped-2-000-barrels-oil-day-

fishing-areas-Nigeria.html#ixzz1U3f574Ah. All sites accessed on 4 August 2011. 208

Idem. According to Nenibarini Zabby, head of conservation at the Centre for Environment, Human Rights

and Development in Port Harcourt. 209

Idem. According to Chief James, assistant secretary to the Bodo council of chiefs and elders and Groobadi

Petta, president of the Bodo city youth federation, youths from the area started to steal oil and refine it in illegal

camps after the two spills occurred. Sylvester Vikpee, a barrister and legal adviser to the council of chiefs, said

Shell had not responded humanely to the disaster. "They do not know the scale of the devastation. One of the

richest companies in the world has done this to us. We have tried to talk to them and asked them what they plan.

They have told us nothing." "That Shell has now accepted responsibility for the massive spill at Bodo is

surprising only in the sense that it is out of place for polluters of this sort to bow to the truth. We only hope that

35

amount of oil spilt is estimated at approximately 20 per cent the amount that leaked into the Gulf of

Mexico following the BP Deepwater Horizon disaster. However, whilst that spill occurred in open

ocean and allegedly dissipated, the oil spill in Nigeria was in the very creek in which the Bodo

community live, feed, and fish. Experts claim the amount of coastline affected is equivalent to the

Deepwater spill.210

Map 3.2.8 (Source:[…])

The case was brought in April 2011 on behalf of some 69,000 Nigerians against SPDC. In an

agreement between the parties, SPDC has agreed to concede to UK jurisdiction; the victims agreed to

exclude Shell from the original action. In August 2011, the news came out that, Shell has accepted

liability. Royal Dutch Shell plc confirmed that its Nigerian joint venture will begin out-of-court

settlement talks with the affected community.211

The settlement negotiations will begin in autumn

2011 and are expected to lead to compensation to the community in "the tens of millions" of dollars,

according to the claimants‘ lawyers.212

An SPDC spokesman confirmed it expects to pay

compensation: "SPDC has always acknowledged that the two spills which affected the Bodo

community and which are the subject of this legal action were operational. As such, SPDC will pay

now they will wake up and accept responsibility for other places in the Niger delta," said Nimmo Bassey, chair

of Friends of the Earth International from Lagos. 210

Idem. 211

A. Flynn, Dow Jones Newswires, London, 3 August 2011, ‗Shell In Nigeria Settlement Talks Ahead Of UN

Delta Study‘, at: http://www.foxbusiness.com/markets/2011/08/03/shell-in-nigeria-settlement-talks-ahead-un-

delta-study/, accessed on 4 August 2011. Furthermore, see the information posted by the law firm Leigh Day &

Co representing the victims, at: http://www.leighday.co.uk/news/news-archive-2011/shell-accepts-responsibility-

for-oil-spill-in, accessed on 4 August 2011. The Shell websites did not contain any information on this litigation

and settlement as per 4 August 2011. „Shell erkent verantwoordelijkheid vervuiling Nigeria‟, News Item 3

August 2011,at: http://nos.nl/video/261691-shell-erkent-verantwoordelijkheid-vervuiling-nigeria.html, accessed

on 6 August 2011. 212

Idem, Leigh Day & Co. See further NOS news item, at: http://nos.nl/video/261691-shell-erkent-

verantwoordelijkheid-vervuiling-nigeria.html, accessed on 8 August 2011.

36

compensation in accordance with Nigerian law. The legal process is continuing and could take several

months to reach a conclusion.‖213

The claimants‘ lawyer welcomed the approach taken by Shell plc. He said: ―The Bodo people

are a fishing community surrounded by water. What was the source of their livelihood now cannot

sustain even the smallest of fish. The spills have caused severe poverty amongst the community. We

will be pressing Shell to provide them with adequate compensation immediately.‖ And: ―I would hope

that we will see urgent work being carried out to remediate the local environment.‖ It is expected that

the settlement funds will be paid through a trust fund 'within six months', and that a clean-up operation

would be underway 'within weeks'. The shares in Shell stock went down in the week of the

announcement of the settlement negotiations.214

Royal Dutch Shell has been sued in a second case related to two oil spills at Bodo in the Niger

Delta by the end of July 2011. The suit was filed at London's High Court on behalf of King Felix

Sunday Berebon of Bodo and 18 other parties. This second case is understood to be at a much earlier

stage of negotiation than the case discussed above.215

3.2.9 Concluding remarks on Shell‟s corporate attitude towards Remedy

Concluding on the basis of the information presented in the previous sections, the authors present the

following observations:

(i) Shell has been under attack from the people in the Ogoni delta and NGOs for a long

time (at least since the beginning of the 90s).

(ii) Shell has in the last decade defined CSR strategies and policies and communicates

them firmly on its corporate website. Shell also declares it adheres to the Ruggie

framework.

(iii) One of the policies is to be more transparent about oil spills and the remediation

thereof. Its website explains precisely what the Shell procedures are and since 2011,

the company has introduced a website where stakeholders can follow how the

company deals with each oil spill;

(iv) Despite the clear policies, many stakeholders are unsatisfied with the company‘s

practices, as can be witnessed from the many protests made against the company and

out loud about polluting the soil, water and air in the Niger Delta; about collaborating

with the Nigerian authorities even when corruption is in play; and about the unfair

distribution of the oil wealth in Nigeria. The UNEP report also remarked that Shell

has not followed its own procedures in a diligent way. Protests have found their way

to courts in Nigeria, the Netherlands and the UK, to parliamentary hearings in the

Netherlands, into complaints to the Dutch and UK NCPs. The protests have been

lodged by Ogoni, NGOs, investors, MPs and others;

(v) In response to these protests, Shell claims that the Nigerian context is extremely

complex and difficult to work in, that most oil spills are caused by sabotage, that Shell

has difficulties to maintain their installations and pipelines in the Niger Delta and that

they depend on others such as the Nigerian government as shareholder in their

Nigerian joint venture of which Shell Nigeria is the operator, to stop gas flaring. As to

the complaints that Shell collaborates too much and in a too non-transparent way with

the Nigerian government, it states that such is necessary to protect its commercial

interests. Regarding complaints that Shell is not prepared to share the results of oil

spill investigations and the findings in EIA and HRIA, the company generally states

that it cannot do so in order to maintain a solid legal position. As regards claims

213

See also news item, ‗This is Money‘, at: http://www.thisismoney.co.uk/money/markets/article-

2022259/Shells-clean-spill-pumped-2-000-barrels-oil-day-fishing-areas-Nigeria.html. 214

Supra note 45 [on the Shell share price in the week of 2-8 August 2011]. 215

News item, R. Mason, Telegraph.co.uk, ‗African king sues Shell over Niger Delta oil spills‘, 6 August 2011,

at: http://uk.finance.yahoo.com/news/African-king-sues-Shell-Niger-tele-4222288078.html?x=0&.v=1, accessed

on 8 August 2011.

37

instituted in the Dutch court, the company defended itself first by bringing forward

many formal defences that delayed the cases from a substantive evaluation by the

court on the question of the duty of care that can be expected from Shell; in the UK,

settlements have begun regarding a court case on oil spillages in Bodo where Shell

commits to be at fault;

(vi) Shell also has started community projects and entered in MOUs with local villages;

(vii) The UNEP Report which came out in the beginning of August 2011 declared the

Ogoni Delta and ecological and human disaster and estimated that it will take 20-30

years to restore the area;

(viii) Consequently, taking into account the GP on Remedy, there is room for improvement,

for example:

Immediate response; joint fact finding and data sharing; transparency on contact with

authorities; joint governance in remediation projects and maybe also in any oil

exploitation and exploration projects; mediation rather than litigation; using local

mediatory conflict resolution methods; starting settlement funds for remediation is

money better spend than in litigation (and lawyers still have work to do in setting up

the funds ;).

3.3 BP – OIL POLLUTION IN THE GULF OF MEXICO

BP CEO Tony Hayward responds to the disaster, which has destroyed the environment and

livelihoods of many: "I'd like my life back". (http://www.huffingtonpost.com/2010/06/01/bp-ceo-tony-

hayward-video_n_595906.html)

3.3.1 Problem Statement: Words are not Enough: Failures in Safety Culture

―The immediate causes of the Macondo [popularly referred to as Deepwater Horizon, due to the name of the oil

rig] well blowout can be traced to a series of identifiable mistakes made by BP, Halliburton, and Transocean that

reveal such systematic failures in risk management that they place in doubt the safety culture of the entire

industry.‖216

On 20 April 2010, the oil rig known as Deepwater Horizon exploded in the Gulf of Mexico217

,

resulting in an 87 day leak during which an estimated 205.8 million gallons of oil were discharged into

the Gulf of Mexico.218

The rig was leased to BP from Transocean, a company that had committed

multiple safety violations prior to the incident.219

Additionally, Transocean has been said to bear

216

White House Report , infra, note 216, at viii. This was written by the National Commission on the Deepwater

Horizon Oil Spill, members of which were appointed by the President. 217

Incident Report published by the White House, January 2011, at:

http://www.decc.gov.uk/en/content/cms/news/bp_us_comm/bp_us_comm.aspx. Robert Bea, Professor, Failures

of the Deepwater Horizon Semi-Submersible Drilling Unit Statement for the Deepwater Horizon Study Group,

20 May, 2010, at: http://ccrm.berkeley.edu/pdfs-papers/beapdfs/DeepWaterBobBeaPrelimAnalyses-rev5-2.pdf

(listing a preliminary catalogue of errors); all websites accessed on 14 August 2011. 218

Press Release: Deepwater Horizon Response Team, at:

http://www.deepwaterhorizonresponse.com/go/doc/2931/840475/ ; See also Deepwater Horizon Accident

Investigation Report, at:

http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/incident_response/STAGING/local_ass

ets/downloads_pdfs/Deepwater_Horizon_Accident_Investigation_Report_Executive_summary.pdf, accessed on

14 August 2011. 219

B. Meier, ―Owner of Exploded Rig Known for Testing Rules‖ 7 July 2010, The NY Times, at:

http://www.nytimes.com/2010/07/08/business/global/08ocean.html?hp.;See also Transocean Safety Statistics, at:

http://www.deepwater.com/fw/main/Safety-Statistics-566.html, all websites accessed on 14 August 2011;The

company‘s own safety statistics, only through 2009 state that 4 (of at least 67) rights achieved a zero incident

record in that period. As ‗incident‘ as used by the company in this context is undefined, one must wonder what

constitutes an incident; if ‗incident‘ is defined only as a Deepwater Horizon level event then it is possible that

38

responsibility for “three of every four incidents that triggered federal investigations into safety and

other problems on deepwater drilling rigs in the Gulf of Mexico since 2008‖.220

BP‘s own report finds

a ―lack of a robust Transocean maintenance management system for Deepwater Horizon.‖221

Even if

courts agree with BP‘s findings, it is unclear what effect this will have as to liability. Under certain

circumstances, most relevant to the case at hand engaging in hazardous activity, vicarious liability may

be found in a contractor relationship.222

It will fall to the courts to allocate responsibility for the

incident.223

Other preliminary responses to the event including oil executives testifying before

Congress, as will be discussed below.

While the legal responsibility for the Deepwater Horizon oil spill has yet to be allotted, it is clear that

safety measures were inadequate. Yet, in recent years, BP has been an industry leader in the

pioneering of green energy and safety standards.224

One cannot help but wonder what happened?

There appears to be a disconnect between the safety standards set out by the company and the actual

implementation. One sees similar problems in the remedies afforded by the company; in practice,

victims are left feeling inadequately compensated. As such, it is necessary to examine BP‘s response

to the oil spill and determine, through use of the Ruggie Framework, what further steps should be

taken to ensure adequate respect for human rights.

3.3.2 BP: General Facts and Policies

BP is a London-based oil and gas company225

, the fourth largest in the world as determined by

revenue.226

It has operations in over 80 countries227

and employs 79,700 people.228

Stock prices in the

year before the 2010 Gulf incident were in the upper 50s and reached a high of $60 per share in

February 2010, with a considerable drop directly after the incident resulting in a low of $27.02 at the

end of June 2010. BP share prices have slowly improved in the year since the incident, and at the time

of writing this article (mid 2011) now hover around $45. Thus as of September 2011, stock prices are

still lower than pre-incident level.229

Given the general upward trend in the NYSE over this period230

as well as for competitors Shell and Texaco, one can reasonably infer that the decrease in BP share

prices is due to investor choice rather than industry or general market conditions. BP reported a profit

(pretax) of $26,426 million in 2009, and a loss of $3,701 million in 2010.231

Due to its geographically

lesser accidents are not counted in this statistics. This would result in a truly dismal safety record. As Transocean

chooses not to present its statistics in a transparent manner, one must question the true safety record. 220

B.Cassleman, Gulf Rig Owner Had Rising Tally of Accidents, 10 May 2010, The Wall Street Journal, at:

http://online.wsj.com/article/SB10001424052748704307804575234471807539054.htm, accessed on 14 August

2011. 221

BP Report, loc.cit .note 218. 222

The general common law principle of agency is that a principle is responsible for acts of an agent dealing on

his behalf. 223

UN HRC, loc.cit. Due Diligence. 224

BP, At a Glance, at: http://www.bp.com/sectiongenericarticle.do?categoryId=3&contentId=2006926,

accessed on 14 August 2011. 225

Idem. 226

Fortune 500, Global Listing, at: http://money.cnn.com/magazines/fortune/global500/2010/full_list/, accessed

on 14 August 2011 227

Supra note 225. 228

Idem, This number is current as of December 2010. 229

Yahoo Finance, Investing, BP plc common stock (NYSE:BP),at:

,http://finance.yahoo.com/echarts?s=BP+Interactive#chart1:symbol=bp;range=2y;indicator=volume;charttype=li

ne;crosshair=on;ohlcvalues=0;logscale=on;source=undefined, accessed on 14 August 2011. 230

NYSE Historical Chart, at:

http://markets.on.nytimes.com/research/stocks/tools/analysis_tools.asp?symbol=599362, accessed on 14 August

2011. 231

BP: Summary Review 2010, at:

http://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/set_branch/STAGING/common_assets/

downloads/pdf/BP_Summary_Review_2010.pdf.last accessed on 14 August 2011, See also Annual Report/SEC

Filing, at:

39

diverse operations, it faces the challenges of interacting with a variety of different legal systems,

whether in the normal course of business or through litigation. Thus in creating corporate policy, BP‘s

legal team must also take into account international standards as well as location specific legal needs.

This is particularly apparent in the case of environmental or human rights, an area of increasing

concern for oil companies. This need for flexibility is demonstrated through BP‘s Code of Conduct

which states that it ―complies with all applicable legal requirements and the high ethical standards (…)

wherever we operate.‖232

BP America Inc,233

is the US operation of BP and it is incorporated in the state of Delaware.234

It is a

wholly owned subsidiary. There is little distinction between the parent and the subsidiary; corporate

materials such as reports and websites make no mention of BP America Inc, instead referring to the

American operations as ‗BP in the US.235

Furthermore, the 2010 Annual Report states that the report

―does not distinguish between the activities and operations of the parent company and those of its

subsidiaries.‖ 236

Legal documents in ―In re Oil Spill on the Oil Rig Deepwater Horizon in the Gulf of

Mexico on 20 April 2010‖237

refer to merely ‗BP‘ and the company has not attempted to limit its

liability to the subsidiary, though due to the apparent lack of separation between operations, such a

strategy would likely fail.238

Additionally, such a dismissal of responsibility would likely result in

reputational damage worldwide.

Other actors involved in the Deepwater Horizon incident are Transocean239

, the owner of the

Deepwater Horizon rig leased to BP240

, and Halliburton241

, a subcontractor responsible for various

duties including, as relevant in the case at hand, cementing work.242

BP has since filed suit243

against

Transocean and Halliburton, alleging that the other company shared in responsibility as ―decisions

made by ―multiple companies and work teams‖ contributed to the accident.‖244

http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/I/BP_Annual_Report_a

nd_Form_20F.pdf , accessed on 14 August 2011 232

BP; Code of Conduct, at:

http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/C/coc_en_full_docume

nt.pdf accessed on 14 August 2011. 233

Note, though that there are rumours regarding a split between BP‘s US and foreign operations so as to contain

the fallout from the Deepwater Horizon incident. BP has not commented upon these rumours; See The

Economist, Should BP split?, The Pros and Cons of Slicing Oil Giants Apart, 30 July 2011, at:

http://www.economist.com/node/21524921, accessed on 14 August 2011; and also see R.Mason, The

Telegraph.co.uk, Oil Spill: BP Split Would Trap Global Assets in US, 16 August 2011, at:

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7827765/Oil-spill-BP-split-would-trap-

global-assets-in-US.html, accessed on 14 August 2011. 234

SEC Filings, at:http://www.sec.gov/cgi-bin/browse-

edgar?action=getcompany&CIK=0000790303&owner=exclude&count=40, accessed on 14 August 2011. 235

BP: in the United States, at:

http://www.bp.com/sectiongenericarticle.do?categoryId=488&contentId=2000734,accessed on 14 August 2011. 236

BP: Annual Report 2010,

at:http://www.bp.com/sectionbodycopy.do?categoryId=9035798&contentId=7066618, accessed on 14 August

2011. 237

US District Court, Eastern District of Louisiana, Deepwater Horizon v Gulf of Mexico, Order and Reasons,

Case 2:10-md-02179-CJB-SS,MDL No.2179, 2 February 2011,at:

http://www.gulfcoastclaimsfacility.com/EDLA_Order_in_MDL.PDF, accessed on 14 August 2011. 238

American jurisprudence allows for piercing of the corporate veil when required by the interests of justice.

Effective control of a company is sufficient reason when the parent company is strategically undercapitalizing. 239

Transocean Ltd. is one of the largest drilling contractors worldwide. It provides rigs and equipment ; see at:

http://www.deepwater.com/, accessed on 14 August 2011. 240

See supra note 216, BP Accident Report. 241

Halliburton is a Texas based company that provides oilfield equipment, at: http://www.halliburton.com

accessed on 14 August 2011. 242

Idem. 243

T.Bergin, M.Herbst, Reuters, BP filed suit in a US federal district court in New Orleans, seeking damages and

contribution, 21 April 2011, at: http://www.reuters.com/article/2011/04/21/us-bp-halliburton-

idUSTRE73K1B820110421, accessed on 14 August 2011. 244

BP: Press Release on Causes of Gulf of Mexico Tragedy, 8 September 2010, at:

http://www.bp.com/genericarticle.do?categoryId=2012968&contentId=7064893, accessed on 14 August 2011.

40

BP has previously addressed human rights concerns in its corporate policy. In 2005, BP published an

internal Guide to Human Rights.245

This includes a checklist for project leaders, a definition of ‗what

human rights means to BP‘ and instructions upon what to do upon discovery of human rights

abuses.246

The company also states in this guide that ―governments have the ultimate responsibility for

protecting and promoting human rights.‖247

This is somewhat mitigated by the statement that ―every

individual and every organ of society‖– generally interpreted to include business – shall strive to

promote respect for the rights and freedoms outlined therein.‖248

Finally, BP makes clear the limits of

its responsibility, noting that ―According to current legal convention, only governments or individuals

acting on behalf of government can commit human rights abuses. (Companies can, however, directly

breach national civil and criminal laws.)‖249

The authors of this article remark that this statement is

somewhat problematic in that it is an oversimplification to argue that non-state actors cannot commit

human rights violations; for example, companies are certainly capable of hiring children, despite

multiple conventions prohibiting child labour, and only the most naïve could believe that

discrimination does not occur regularly within many companies.250

As of this time, there is indeed no

international legal framework in which to prosecute non-state human rights violations by companies

so it instead falls to the national courts to enforce these norms.251

BP utilizes an internal grievance process for its employees. While the precise details are not available

to the public, presumably published instead in an employee handbook or similar document, one may

glean the basics from a website search. BP states that it ―expect[s] everyone who works for BP to ask

questions or report any concerns they have about risky or unethical behaviours among our employees,

contractors and business partners.‖252

BP provides a forum for these concerns through its confidential

OpenTalk hotline.253

BP notes that ―OpenTalk contacts are initially handled by an independent

organization before being passed to a senior BP compliance manager, who will arrange a response

and, if appropriate, an investigation.‖254

No additional information is given about the independent

organization, though often BP utilizes Ernst & Young as a third party auditor.255

The authors wonder

whether what practical effect this hotline has due to the difficulty in reaching it; for example, the

telephone number is not available through the webpage discussion of the programmeme, but requires a

search through BP‘s Code of Conduct, a search which ultimately yields the number. Note that while

the materials may be more readily available to employees (perhaps through internal posters, a

handbook, or similar), the general public will have great difficulty finding and utilizing this complaint

245

BP: Human Rights,

at:http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/BP_Human_Rights_

2005.pdf,accessed on 14 August 2011. 246

Idem. 247

Idem. 248

Ibidem, Quoting UN Draft Norms, pp. 2-3. 249

Idem. 250

Convention on the Rights of the Child, at: http://www.unicef.org/crc/, ILO Convention Against the Worst

Forms of Child Labour, at: http://www.ilo.org/ilolex/cgi-lex/convde.pl?C182, all websites accessed on 14

August 2011. 251

In Martin Scheinin‘s proposal for a World Court of Human Rights, various actors besides States can accept

jurisdiction of the Court, such as transnational companies who conduct a considerable part of the production or

service operations in a country or in countries other than the home State . Even ‗‘entities‘‘ that have not

generally accepted jurisdiction of the Court can accept that jurisdiction on an ad hoc basis. All kinds of exercise

of jurisdiction can result in a legally binding judgement of the Court, M. Scheinin, Towards a World Court of

Human Rights, Research Report within the framework of the Swiss Initiative to commemorate the 60th

anniversary of the Universal Declaration of Human Rights, Agenda for Human Rights, 30 April 2009, pp. 18-

20,at: http://www.udhr60.ch/report/hrCourt_scheinin0609.pdf, accessed on 14 August 2011 252

BP Website: Speaking Up, at:

http://www.bp.com/sectiongenericarticle800.do?categoryId=9036195&contentId=7066925, accessed on 14

August 2011. 253

Idem. 254

Idem. 255

See supra note 350.

41

mechanism.256

The number is intended for ―Employees, contractors or other third parties who have

questions about the code or are concerned that laws, regulations or the code of conduct may be being

breached…‖257

but due to the difficulties discussed above one must question the accessibility for

communities impacted by BP. As for the practical effects of OpenTalk, a provided graph shows the

number of OpenTalk cases gradually decreasing throughout the years shown, 2006 to 2010.258

Finally,

BP‘s reporting procedure also discusses an ombudsman, stating that ―workforce can also contact our

independent US office of the ombudsman, headed by former US District Court Judge Stanley

Sporkin.‖259

This discussion of an ombudsman position indicates that this webpage is not frequently

updated, as BP announced that this past October that this position will close in June 2011.260

Thus

while one sees grievance procedures, the actual effectiveness must be questioned.

In addition to the post spill actions discussed in 3.3.6, the Oil Pollution Act, applicable to all

operations in US territory (Deepwater Horizon was located in US waters), also contains guidelines for

pre spill behaviour. It requires oil companies to have in place a "plan to prevent spills that may

occur"261

as well as a "detailed containment and clean-up plan"262

for oil spills. Prior to beginning the

Gulf Oil drilling project, BP filed an ―Exploration and Environmental Impact‘ plan.263

This plan did

not include a required detailed impact analysis; BP was apparently exempted from this portion of the

requirement.264

BP‘s incomplete drilling plan was approved by the Minerals Management Service of

the Interior Department (now the Bureau of Ocean Energy Management Regulation and Enforcement),

an approval process criticized by some as mere ―rubber stamping‖265

of BP practices. Post spill review

of the plan suggests that it was merely an adaptation of a previous plan for spills in Alaska, as it

referenced the need to protect ―sea lions, seals, sea otters (and) walruses‖, wildlife not found in the

Gulf.266

Following the lengthy clean-up process in the Gulf since the incident, many have expressed

the view that the plan was vastly insufficient.

3.3.3 BP and the Ruggie Framework

256

Furthermore, one must wonder how it is determined that an investigation is appropriate. The third party

auditor is Ernst and Young, who are involved in many of BP‘s auditing. While outside oversight is important,

using the same company for all one‘s activities may result in the development of a relationship. This is not to

suggest that there is any inappropriate behaviour on behalf of the auditors or BP, but merely a concern for

appearance when third party auditing is conducted with a third party one is closely linked to. Perhaps BP would

be better advised to separate its financial and CSR reviews. 257

See supra note 251. 258

Idem, This is particularly interesting when one considers the allegations of safety violations (see below)

during this time period. Furthermore, the process is somewhat confusing. The website link for complaints is

given as http://opentalk.bpweb.bp.com, but this link is broken and only after a careful search of the site does one

find that the OpenTalk is instead found at: https://www.opentalkweb.com/, both websites accessed on 14 August

2011. 259

Idem. 260

T.Webb, BP to Close its US Safety Watchdog, The Guardian, 10 October 2010, at:

http://www.guardian.co.uk/business/2010/oct/10/bp-us-safety-ombudsman-closure, accessed on 14 August 2011. 261

85 Tul. L. Rev. 989 (2010). 262

Idem. 263

See:http://abcnews.go.com/Business/wireStory?id=10515973, accessed on 14 August 2011. 264

US Exempted BP‘s Environmental Impact, at:http://www.washingtonpost.com/wp-

dyn/content/article/2010/05/04/AR2010050404118.html, accessed on 14 August 2011. 265

For example, BP had multiple revisions regarding the proposed drilling method. One of these revisions was

approved a bare five minutes after submission. Idem, citing Permit Snafus on BP‟s Oil Well, Wall Street Journal,

1 June 2010. 266

See supra note 261; see also Reuters, Wulruses in Luisiana? Eyebrow-raising details of BPs spill response

plan, at: http://blogs.reuters.com/environment/2010/05/27/walruses-in-louisiana-eyebrow-raising-details-of-bps-

spill-response-plan/;and see Public Employees for Environmental Responsibility, Did anyone actually read Bps

oil spill response plan,25 May 2010, at: http://www.peer.org/news/news_id.php?row_id=1351, all websites

accessed on 4 August 2011, Full text of the response plan including a discussion of the ‗worst case scenario‘ (in

fact a massive underestimate of the scope of the Deepwater Horizon disaster) is available at:

http://www.boemre.gov/DeepwaterHorizon/BP_Regional_OSRP_Redactedv2.pdf.

42

As has been explained in section 2 above, the second pillar of the Ruggie Framework considers the

company‘s responsibility to respect human rights. This ―means – according to Ruggie – to act with

‗due diligence‘ to avoid infringing on the rights of others.‖267

BP has faced accusations of human

rights abuses and so has chosen to formally address this issue in its corporate policy. BP ―participated

in discussions about the development of a new human rights Framework led by Professor John

Ruggie―268

and while one cannot find reference to the Ruggie Framework in its current dealings269

, the

company has announced its intent to ―carry out some detailed analysis of its current practices

regarding human rights and considering whether it needs to make any changes to them in light of the

Ruggie Framework.‖270

No additional information about the analysis is available at this time. BP is

more explicit, however, about its adherence to other reporting standards, Global Compact271

and

OECD standards. Though BP does not discuss its usage, one considers that this may be due to the

more concrete nature of these guidelines.

3.3.4 Facts of the Deepwater Horizon Incident

It will be some time before the courts determine the true facts and who bears the ultimate

responsibility for the incident. Yet, as shown in the accident report, one can already conclude that

industry safety standards are either insufficient or not properly enforced, resulting in incidents and oil

spills that have cost human lives and destroyed flora and fauna respectively has put the means of

existence for many, mainly poor, people in peril. As will be demonstrated below, the remedies

provided by the oil company have not at all fully restored damages caused to the local people and the

environment. This case highlights the need for scrutiny of corporate safety instructions, human rights

policies and strict environmental care policies, and controlling the compliance thereof, both pre and

post-accident.

3.3.5 Litigation

The Deepwater Horizon spill resulted in the release of 205.8 million gallons of oil into the Gulf

Region.272

The oil spill‘s effect was felt far beyond its immediate impact upon wildlife; the damage to

the environment had a ripple effect upon the marine food chain. As a result, fishermen along the Gulf

Coast have lost their livelihoods. BP faces many claims relating to this disaster273

, ranging from tort to

property damage to civil rights claims.274

BP states on its website that it is ―committed to paying all

267

Lambooy, CSR 2010, op.cit. (note 278). 268

BP: Human Rights and Sustainability, at:

http://www.bp.com/sectiongenericarticle800.do?categoryId=9036198&contentId=7066931, accessed on 14

August 2011. 269

Compare to, for example, the concrete discussion of Chevron‘s use of the framework, supra Section 3.1 270

Idem. 271

BP: Global Compact ,at :

www.bp.com/extendedsectiongenericarticle.do?categoryId=9036156&contentId=7066908, accessed on 14

August 2011; BP lists out the Global Compact principles and in the next column lists where it is addressed in

both BP‘s sustainability report and on the website. This is done in a general fashion: ethics rather than a specific

anti-bribery plan. However, in spite of the practical problems in enforcement, this still shows a commitment to

the principles. One hopes this is the first step towards true implementation of the Global Compact. 272

Hoch, Maureen, New Estimate Puts Gulf Oil Leak at 205 Million Gallons, PBS NewsHour (MacNeil/Lehrer

Productions), 2 August 2010, at:http://www.pbs.org/newshour/rundown/2010/08/new-estimate-puts-oil-leak-at-

49-million-barrels.html, accessed on 14 August 2011. 273

BP: Litigation Database, at:

http://www.eli.org/Programme_Areas/deepwater_horizon_oil_spill_litigation_database.cfm, accessed on 14

August 2011. 274

Mowbray, R. ―Lawyers Lining Up BP Litigation‖, The Times Picayune, 16 May 2010, at:

http://www.nola.com/news/t-p/frontpage/index.ssf?/base/news-14/127399141295480.xml&coll=1, accessed on

14 August 2011.

43

legitimate claims for damages resulting from the Deepwater Horizon Incident.‖275

There is no

elaboration upon the definition of ‗legitimate‘ in this context, which is interesting when one considers

the limitations upon liability as a result of the Oil Pollution Act, discussed later. It is difficult to get a

sense of how much this will ultimately cost the company, considering that the company‘s website (as

per mid 2011276

) states that it has spent nearly $40 billion, with $20 billion of this being contributions

to the fund it created for Gulf incident victim compensation (the Fund). Such compensation is as

required under the Oil Pollution Act, but this Act also limits liability of oil companies to $79 million.

This fund will be discussed in greater detail in 3.3.6 []. BP had ―committed to making additional

payments to the Fund of $1.25 billion each quarter until the end of 2013.‖277

While this Fund may

appear more than sufficient, one must also consider the massive impact of the incident. BP‘s

commitment to ―all legitimate claims‖ could conceivably exhaust the Fund. As the Oil Pollution Act

puts a cap upon BP‘s liability, a cap that has already been exceeded by several billion dollars, one

must wonder how the company defines ―all legitimate claims‖. On 8 July 2011, BP appears to have

given an answer to this question. The document, not yet available to the public, allegedly states a

desire to cease future payments because ―areas affected by the spill have recovered and the economy is

improving.‖278

3.3.6 Reponses to the Incident

In addition to these costs, the Deepwater Horizon incident also resulted in reputational damage to BP,

as shown by the decrease in stock prices and its removal from the DJSI.279

Clearly the investment

community had concerns about BP‘s ability to remedy the problem. It is impossible to determine the

dollar impact of the ‗boycott BP‘ movement280

but the related Facebook group has over 800,000

members. 281

BP likely felt a need to generate positive PR and improve its image, as shown by its

publications on its contributions to the clean-up. BP‘s website, at the one year anniversary of the

incident, features a bright red link, as opposed to the green and yellow colour scheme used elsewhere,

to the ‗Gulf of Mexico Restoration‘282

; the linked page features beautiful images of local wildlife and

discusses in general terms the company‘s involvement in ‗restoring the environment‘ and ‗restoring

275

BP: Gulf of Mexico Claims,

at:http://www.bp.com/sectiongenericarticle.do?categoryId=9034722&contentId=7064398, accessed on 14

August 2011. 276

The statistics released by the Fund suggest more money has been paid out. 277

BP: How We Responded Trust Fund, at:

http://www.bp.com/sectiongenericarticle800.do?categoryId=9036584&contentId=7067605 , BBCNews, BP

Back to Profit After Oil Spill, 2 November 2010, at: http://www.bbc.co.uk/news/business-11671953 ,all websites

accessed on 14 August 2011. 278

―BP Argues Gulf Recovery So Strong that Future Loss Claims Should End.‖ Washington Post 8 July 2011, at:

http://www.washingtonpost.com/business/apnewsbreak-bp-argues-gulf-recovery-so-strong-that-future-loss-

claims-should-end/2011/07/08/gIQA3Vvp3H_story.html , accessed 14 August 2011. 279

BP was removed from the Dow Jones Sustainability Index on 31 May 2010, due to the ―oil-spill catastrophe

in the Gulf of Mexico and its foreseeable long-term effects on the environment and the local population – in

addition to the economic effects and the long-term damage to the reputation of the company.‖ BP Exclusion

Statement, at: http://www.sustainability-

index.com/djsi_pdf/news/PressReleases/20100531_Statement%20BP%20Exclusion_Final.pdf,BP was also

removed from the FTSE4Good Index. McAlister and Webb, ‗BP Thrown Off FTSE4Good Ethical Index‘, The

Guardian ,10 September 2010, at: http://www.guardian.co.uk/business/2010/sep/10/bp-thrown-off-ftse4good-

ethical-index. BP does not link bonus pay to CSR ratings, though after the Gulf oil Spill it now links bonuses to

safety. BP, Bonus Structure, at:

http://www.bp.com/sectiongenericarticle.do?categoryId=9027666&contentId=7050547, all websites accessed on

13 August 2011 . 280

This boycott, which developed soon after the incident, arguably has a greater impact upon station owners than

BP itself. See http://motherjones.com/blue-marble/2010/06/should-you-boycott-bp, accessed on 14 August 2011. 281

See http://www.facebook.com/pages/Boycott-BP/119101198107726. 282

See BP Website

44

the economy‘283

. BP also took an effort to issue ads in The Economist and various newspapers on the

progress made in cleaning the Gulf.284

Consumer opinion is an important factor to keep in

consideration when analysing the disaster and so is the perception of talented future personnel.285

Possible theories of the case for litigation are limited. Due to the location of the disaster and victims,

one would have to look at the duty of the US to protect its citizens against human rights violations,

including those of third parties such as companies. As discussed in section 2, there exist assorted

international treaties setting out human rights that are violated in similar cases. The US has not ratified

the majority of these treaties and, indeed, opposes some of the concepts contained in it. It maintains its

persistent objector status. Hence, theoretically, the US cannot be said to have violated any of the third

generation rights. Thus, for example, Louisiana fishermen may not argue that their right to earn a

livelihood has been threatened by the oil spill.

The American Convention on Human Rights does recognize a ‗right to the environment‘ in Article 11

of the Additional Protocol to the American Convention on Human Rights in the Area of Economic,

Social, and Cultural Rights.286

However, the US has not ratified this treaty and hence is not bound by

it. Furthermore, in Medellin v. Texas287

the Supreme Court of the United States held that international

commitments such as treaties are not binding domestically absent implementing legislation or

indication that the treaty was meant to be ―self-executing.‖288

As such, one may not bring suit in the

US against the US on the basis of international obligations absent this narrow criteria.

US Domestic law - Case Theories: non-tort damages and Collective Action

As a general rule, American jurisprudence revolves around an individual, rather than collective theory

of rights. As such, the human rights framework is difficult to apply directly to the oil spill litigation.

As discussed above, American jurisprudence does not recognize a right to the environment, to make a

living, or to clean water.289

One does see human rights abuses directly addressed in the case of civil

rights suits290

, but for the most part legal responses are in the realm of torts. While violation of rights

widely accepted under an international framework (though not in the US) has occurred, torts theory

proves the most practical means of achieving recompense in domestic courts.

283

Idem. Gulf Of Mexico Restoration,

at:http://www.bp.com/sectionbodycopy.do?categoryId=41&contentId=7067505, access on 14 August 2011 284

J. Quinn, Telegraph.co.uk, BP to admit $1 m—a-week advertising spree,28 August 2010 at:

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/7969586/BP-to-admit-1m-a-week-

advertising-spree.html, accessed on 13 August 2011. 285

See supra note 155. 286

Additional Protocol to the American Convention on Human Rights in the Area of Economic, Social, and

Cultural Rights at Article 11., at:http://www.bp.com/sectionbodycopy.do?categoryId=41&contentId=7067505,

accessed on 14 August 2011. 287

Medellin v. Texas, 552 U.S. 491 (2008). This case involved a Mexican national, Medellin, convicted and

sentenced to death for the rape and murder of two individuals in the state of Texas. Medellin was not informed of

his right to contact the Mexican consulate as required under the Vienna Convention. Mexico brought this issue

before the International Court of Justice. The Supreme Court of the United States determined that the

international court‘s ruling was not legally enforceable in the United States, as none of the relevant treaties had

implementing legislation or were deemed to be self- executing. 288

Defined as when the ―treaty has automatic domestic effect upon ratification.‖ Idem., at FN 2. 289

Note that the Clean Water Act does set out water quality standards and allows for citizens to bring suit over

violation. 33 U.S.C. § 13655 However, such suits are not brought under a rights based framework, as in a right to

clean water, but as violation of a statute which prohibits, for example, discharge of pollutants into a water

supply. Furthermore, the OPA does permit recovery for environmental damages though not at the individual

level: ―resources "include […] land, fish, wildlife, biota, air, water, ground water, drinking water supplies, and

other such resources belonging to, managed by, held in trust by, appertaining to, or otherwise controlled by the

United States, "state or local governments or Indian tribes, or foreign governments." Designated trustees are the

only parties that may recover for the natural resource damages." S.A. Millan, ―Escaping the ‗Black Hole‘ in the

Gulf‖ 24 Tul. Envtl. L.J. 41 (2010) at 43, citing the Oil Pollution Act 33 U.S.C. § 2702(b)-(f). 290

Civil Rights suits at the Environmental Law Institute BP Litigation Database, at:

http://www.eli.org/programme_areas/deepwater_horizon_oil_spill_litigation_database_results.cfm?case_type=C

ivil%20Rights, accessed on 14 August 2011.

45

Note that the US Department of Justice is still pursuing criminal investigation.291

While the federal

government has not filed criminal charges, the on -going investigation suggests that such a case is a

reasonable possibility.

Cultural Losses

Putting a price tag upon the damage, as typically required in torts or property based action, will be

difficult. While one may compensate fishermen for a lost season‘s catch, it is difficult to even

contemplate a legal remedy for the loss of one‘s way of life. This is particularly problematic among

the Cajuns of Louisiana, a unique culture dependent upon the rapidly decreasing wetlands of

Louisiana, already suffering from devastation caused by Hurricane Katrina.292

The additional impact

of the oil spill has resulted in further damage to these communities. There is currently little recourse

for cultural losses as experienced by Louisiana communities.

One sees an analogy in the Exxon Valdez case. This 1989 incident, the worst oil spill in American

territory prior to the Deepwater Horizon incident, occurred when an oil tanker called Exxon Valdez

ran into a reef and, due to the resulting damage to the vessel, released its cargo of oil into the Alaskan

waters.293

Due to post Exxon Valdez legal developments which will be discussed below, the Exxon

Valdez incident is of limited interest when discussing the current litigation. However, one case theory

is of interest. A group of Amerindians brought suit for cultural losses, arguing that due to the

environmental damage caused by the oil spill, they could no longer practice traditional hunting and

fishing.294

The court did not find a ‗special injury‘ to the cultural group as it determined that fishing

and hunting disruptions resulting from the oil spill were not considered unique to the group. The court

seemingly fails to take into account the cultural relevance of hunting and fishing as practiced by the

Amerindians, as opposed to the mere financial losses of commercial hunting and fishing organizations.

However, the court did find a general "right to obtain and share wild food, enjoy uncontaminated

nature, and cultivate traditional, cultural, spiritual, and psychological benefits in pristine natural

surroundings."295

While there is some right to enjoy the environment, one must show special damages

for the right to be actionable. This is a high bar; it is difficult to see what, if any, damages would be

sufficient to meet it and the court does not elaborate.

Indeed, it appears difficult to distinguish the Deepwater Horizon case from precedent. Some hope

appears when one takes into account that recent years have seen a change in attitudes towards

protection of native peoples. The US has recently announced an intention to sign the Declaration on

the Rights of Indigenous Peoples.296

This document, while non-binding, does provide a basis for

recognition of the right to native lands and traditional practices and demonstrates a greater willingness

on the part of the administration to take into account indigenous concerns. Whether this increased

regard extends to the judiciary is yet to be seen. Additionally, one would face the problem of defining

traditional Louisiana cultural groups as indigenous peoples; such protection may be deemed to be

limited to tribal groups formally registered as such.297

It remains to be seen if lawyers will even

291

Catan T., Chazan G., Spill Draws Criminal Probe, Wall Street Journal,2 June 2010, at:

http://www.online.wsj.com/article/SB10001424052748704875604575280983140254458.Html accessed on 14

August 2011;See also 35 Tul. Mar. L.J. 127 2010. 292

Courselle, D. ―We (Used to?) Make a Good Gumbo: The BP Deepwater Horizon Disaster and Heightened

Threats to the Unique Communities Along Louisiana‘s Gulf Coast‖ 24 Tul. Envtl. L.J. 19 (2010). 293

Case, infra note 295. 294

Catan and Chazan, loc.cit.(note 291). 295

In re, Exxon Valdez, No. A89-0095-CV, 1994 WL 182856 (D. Alaska Mar. 23, 1994),

affdsubnom. 104 F.3d 1196, 1198 (9th Cir. 1997). 296

UN Declaration on the Rights of Indigenous Peoples, at:

http://www.un.org/esa/socdev/unpfii/en/declaration.html, accessed on 14 August 2011. See also: Thompson, K.

―US Will Sign UN Declaration on Rights of Native Tribes, Obama Says‖ The Washington Post, 16 December

2010, at: http://www.washingtonpost.com/wp-dyn/content/article/2010/12/16/AR2010121603136.html, accessed

on 14 August 2011. 297

For example, the Atakapa Ishak, traditionally subsistence fishermen living in a ‗water village‘ in the wetlands

of Louisiana, were significantly impacted by the incident. One tribal member refers to the incident as

precipitating ―cultural genocide‖ ,at: http://news.nationalgeographic.com/news/2010/06/100608-us-oil-gulf-

indians-video/, accessed on 14 August 2011. No suit on behalf of the tribe has been filed at the time of writing.

46

attempt to revive this theory of cultural losses or will instead focus upon less complex, economically

provable damages.

Class Action Fairness Act

A class action suit is perhaps the most likely means of receiving compensation for individuals with

injuries not recognized or denied298

by the OPA (see below in section 3.3.7). Many lawyers have

engaged in advertising practices299

regarding class action suits and the individual seeking redress

outside the Oil Pollution Act will find him or herself confused by the wealth of preliminary

information inviting them to join a class.

While class action suits allow for recompense of claims that are impractical to pursue on an individual

basis, individuals in the Gulf Region will have some difficulties pursuing this litigation. The US Class

Action Fairness Act of 2005 provides further difficulties for individuals seeking damages. This Act

requires such class action suits to be removed to federal district courts whenever certain criteria apply:

an amount over $5 million in controversy or parties from different states.300

This avoids forum

shopping and allows for greater federal scrutiny. However, this can result in more costly litigation

especially here when a case is removed from Louisiana as the victims will be dealing with unfamiliar

law (and thus may not be using a local lawyer who is easily accessible and familiar with community

standards). Furthermore, the case will be placed at the mercy of the busy federal docket. For example,

BP litigation has so far been hindered by the fact that seven judges at the federal level have disclosed

conflicts of interest, recusing themselves for reasons such as owning shares of BP stock.301

Some

scholars argue that the Class Action Fairness Act and its automatic removal is inappropriate for

environmental issues.302

As one critic put it, environmental damage ―usually causes a small amount of

harm to a large number of people.‖303

Environmental disasters as compared to, for example, class

action suits against an unsafe vehicle sold countrywide, disproportionately impact a particular

community. By moving the suit out of the community, the judge is removed from the true impact of

the disaster.

Furthermore, the Supreme Court of the United States ruled on 20 June 2011 that female employees of

Wal-Mart could not constitute a class in a case involving gender discrimination, due to the sheer size

of the class. It remains to be seen what affect this have upon class certification in general, but one can

expect to see greater scrutiny in certifying a class. This is a potential problem for class made up of, for

example, fishermen who may be spread geographically across the region.

Alternate theories: Crime Victims Rights Act

Some scholars have suggested that current legal frameworks are insufficient for environmental

damages. In recent years, one sees the creative application of the Crime Victims Rights Act as a

vehicle for pursuing redress against corporate caused environmental damages304

The Act requires

victims to be granted a ―reasonable procedure‖ for pursuing claims and, if granted status as a ‗victim‘

the injured party has greater status in pursuing compensation for the environmental crime, as

application of the Act grants these individuals a voice in criminal proceedings.

298

For example, it is conceivable that a subsistence fisherman would have difficulty producing sufficient

documentation for recovery from the fund. A class action suit which focuses upon the damage to the community

might be a more effective vehicle for litigation. 299

See, for example, http://classaction-bp.com/; http://classactionbp.com/; http://www.oil-rig-spills.com/;

http://www.gulfcoastoildisaster.com/; and http://www.glagolawfirm.com/PracticeAreas/BP-Class-Actions.asp

Additionally many individual lawyer and firm websites are available to discuss potential claims with individuals

who may be eligible. 300

Class Action Fairness Act. 301

Idem. 302

Drew Cohen ―Resuscitating Erin Brockovich After the BP Oil Spill: Carving Out an Exception to the Class

Action Fairness Act for Environmental Disaster Suits‖ 2 Geo. Wash, Journal of Energy and Environmental Law,

72 (2011). 303

Idem. 304

Baldas,T A., New Type of Crime Victim Is Speaking Up, NAT'L L.J., 20 April 2009.

47

The Crime Victims Rights Act of 2004305

defines the applicable victim as ―a person directly and

proximately harmed as a result of the commission of a Federal offense‖306

and guarantees individual

several rights such as the ―right to be reasonably heard at any public proceeding‖307

. The vagueness of

these rights and broad application means that courts have struggled308

over whether this Act applies to

victims ―harmed as a result of the commission of a Federal offense‖ related to environmental crimes

(for example, improper disposal of chemical waste). However, jurisprudence in this field is still

growing and it is difficult to predict whether a given court will apply the Crime Victims Rights Act to

victims of a particular case. The people of the Gulf region have and continue to suffer as a result of the

Deepwater Horizon spill. As such, if criminal proceedings occur, one hopes that those truly affected

will be involved.

3.3.7 Settlements: A Commitment to „All‟ Legitimate Claims?

The Ruggie Framework represents a unique cooperation between states and companies to protect the

human rights. The Fund, though it does not explicitly discuss the influence of the Ruggie Framework,

takes this a step farther. From the Ruggie perspective, the Fund is a mix of company and state efforts

to offer a remedy to victims. This legal and practical scheme allows for the reparation of individual

damages in a timely fashion, rather than through lengthy litigation.

The authors did not find any non-judicial remedies309

on the part of BP, though that is likely due to the

US legal culture which may interpret apologies as an admittance of fault. Additionally, the need for a

coordinated response across multiple states means that the federal government needed to take the lead

in environmental rebuilding efforts.

Oil Pollution Act of 1990

A vast number of claims against BP will fall under the framework of the Oil Pollution Act of 1990.310

The Act, created in the aftermath of the Exxon Valdez oil spill311

exists to ―establish limitations on

liability for damages resulting from oil pollution, to establish a fund for the payment of compensation

for such damages…‖312

It limits the liability of oil companies to ―the total of the liability of a

responsible party under section 1002 and any removal costs incurred by, or on behalf of, the

responsible party, with respect to each incident shall not exceed…[formula that gives particular dollar

amounts as determined by the size of the oil tanker or offshore platform]‖313

There are exceptions to

this limitation on liability in the case of

gross negligence or wilful misconduct of, or (B) the violation of an applicable Federal safety, construction, or

operating regulation by, the responsible party, an agent or employee of the responsible party, or a person acting

pursuant to a contractual relationship with the responsible party[…]314

This provides an overarching framework for evaluating fault, and rapidly distributing compensation.

Thus this Act simplifies the recovery process for the victims.315

The OPA also benefits affected

communities, as it requires oil companies to have both a plan to prevent spills and a plan in case of

accidents. In addition to the plans required by the OPA, the federal government oversees the National

305

18 U.S.C. §3771(e) (2006). 306

18 U.S.C. §3771(e) (2006). 307

Idem. 308

United States v. Atd. States Cast iron Pipe Co., 612 F. Supp. 2d 453, 470 (D.N.J. 2009); United States v.

CITGO Petroleum Corp., Cr. No. C-06-563, 2007 WL 4577400 (S.D. Tex. Dec. 21, 2007). 309

For examples of potential non- judicial remedies, see supra section 2. 310

Act of 1990, see Ronen infra note 311. 311

Ronen, Perry ―The Deepwater Horizon Oil Spill and the Limits of Civil Liability‖, 86 Wash. L. Rev. 1, 50

(2011). 312

Idem. 313

OPA S 1004. 314

Idem. 315

Oil Pollution Act, Bill Summary and History ,at: http://thomas.loc.gov/cgi-

bin/bdquery/z?d101:HR01465:@@@L&summ2=m&, accessed on 14 August 2011.

48

Oil and Hazardous Substances Pollution Containment Plan, in which the federal government,

companies, and regional authorities work together to formulate contingency plans in the case of oil

spills.316

Thus the US government is ultimately responsible for clean-up plans, but the responsible

company is required to be involved in the process. Costs are managed through the Oil Spill Liability

Trust Fund, funded by a tax per oil barrel, and repaid by the responsible company.317

Most notably, the OPA places a $75 million cap upon damages as applicable to this incident.318

Again,

this is particularly interesting when considering that BP has promised to pay ―all legitimate claims‖319

and it will be some time before it is clear what BP‘s promise actually means for the victims. All claims

must first be submitted to the $75 million fund320

, which will be quickly exhausted by the volume of

claims. Note that the $75 million cap is not absolute; determining the maximum financial contribution

is somewhat more complex in practice. Oil companies are responsible for ―clean- up costs‖ (precisely

where the line between clean- up and compensation falls is unclear. Is this limited to the direct impact

of the oil spill, or is the oil company financially responsible for farther reaching impacts along the

food chain?) Additionally, there is still the possibility of additional damages in the case of ―gross

negligence‖ or criminal action. Furthermore, the Act ―provides that if a responsible party can establish

that the removal costs and damages resulting from an incident were caused solely by an act or

omission by a third party, the third party will be held liable for such costs and damages.‖321

As

discussed previously, Transocean is thought to bear some of the responsibility for the incident.

Unsurprisingly, BP has filed suit against Transocean and Halliburton (responsible for pouring the

concrete that may have buckled and contributed to the disaster).322

Whether this will be sufficient to

significantly reduce BP‘s liability and or allow it to recover from Transocean and Halliburton under

the theory of joint liability remains to be seen.

At the time of the incident there was discussion in Congress over raising the cap on damages.323

This

was ultimately unsuccessful for reasons best summed up by Senator Landrieu (Democrat, Louisiana):

―We want to be careful before we change any of these laws that we don‘t jeopardize the operations of

an on-going industry, because there are 4,000 other wells in the Gulf that have to go on.‖ 324

Other

congressmen more vehemently opposed greater contribution: Representative Barton (Republican,

Texas) stated that ―it is a tragedy of the first proportion that a private company can be subjected to

what I would characterize as a shakedown, in this case a $20 billion shakedown.‖325

One may

conclude that any legislative change in favour of the victims of the oil spill is unlikely. If BP intends to

pay the full $20 billion or more, it will be of its own free will (absent a judicial finding that BP

engaged in gross negligence, resulting in punitive damages).

The Gulf Coast Claims Facility

Claims against BP are filed through the ‗Gulf Coast Claims Facility‘326

under administrator Kenneth

Feingold.327

This facility was jointly created by BP and the US Department of Justice and the funds are

316

National Oil and Hazardous Substances Pollution Containment Plan, at:

:http://www.epa.gov/emergencies/content/lawsregs/ncpover.htm, accessed on 13 August 2011. 317

Oil Spill Liability Trust Fund, at: http://www.epa.gov/emergencies/content/learning/oilfund.htm, accessed on

14 August 2011 318

Oil Pollution Act of 1990 at §1004, supra note 313. 319

Idem. 320

Ibidem, at §2713 321

Ibidem, at §1002(d). See also 24 Tul. Envtl. L.J. 41 2010 322

Weber, H. R., BP Sues Transocean, Gulf Oil Spill Rig Owner, For Disaster Huffington Post, 20 April 2011,

at: http://www.huffingtonpost.com/2011/04/20/bp-sues-cameron-international-blowout-

preventer_n_851770.html, accessed on 14 August 2011 323

See H.R. REP. No. 111-521, at 6 (2010). 324

Lerer "Effort to Raise Oil-Spill Liability Fails in Senate", 14 May 2010, at:

http://www.businessweek.com/news/2010-05-14/effort-to-raise-oil-spill-liability-fails-in-senate-update1-

.html,accessed on 14 August 2011 325

CNN. Transcript, 18 June 2010, at: http://archives.cnn.com/TRANSCRIPTS/1006/18/ltm.02.html, accessed

on 14 August 2011. 326

Claims process for Individuals and Business, 17 September 2010,

at:http://www.restorethegulf.gov/release/2010/09/17/claims-process-individuals-and-businesses, accessed on 14

August.

49

administered by appointed trustees Kent Syverud, Dean of Washington University in St. Louis School

of Law, and John S. Martin Jr., a retired federal judge.328

This facility is ―the official way for Individuals and Businesses to file claims for costs and damages

incurred as a result of the oil discharges due to the Deepwater Horizon Incident on April 20, 2010

("the Spill")… [The Administrator] and the GCCF are acting for and on behalf of BP Exploration &

Production Inc. in fulfilling BP‘s statutory obligations as a ―responsible party‖ under the Oil Pollution

Act of 1990.‖329

Eligibility for the claims fund is dependent upon:

- Property damaged by the oil spill or the clean-up efforts (example: damage to a boat)

- Loss of income/earning capacity (example: Lost your job or had your hours cut because of the

spill — fishermen, workers in seafood industry, workers in hotels or restaurants)

- Net loss of profits or earnings from a business you own (example: boat owners, hotel owners,

restaurant owners)

- Subsistence loss (example: can no longer catch fish to feed your family)

- Approved Removal and Clean-up Costs (example: removal activities that are approved by the

Federal On-Site Commander or are consistent with the National Contingency Plan)

- Physical injury or death (injury to the body proximately caused by the Spill or the explosion

and fire associated with the Deepwater Horizon oil spill, or by the clean-up of the Spill)330

As previously discussed, BP has stated that it is ―committed to paying all legitimate claims‖331

; monies

paid so far total over $3 billion.332

Lawsuits currently pending exist under a variety of categories,

ranging from simple actions for calculable damages to civil rights violations.333

Note that there is some debate over the use of the term ‗neutral‘ in that BP was involved in the

creation of the fund and Mr Feingold may be ―publically perceived‖ to be acting as BP‘s counsel as

BP is paying him for his role as administrator.334

Ethics experts debated this characterization335

but

Judge Barbier ruled that ―BP has created a hybrid entity, rather than one that is fully independent of

BP.‖336

Thus the Feingold is ―independent‖ in the sense that BP does not control Mr Feinberg‘s

evaluation of individual claims… [but] cannot be considered ―neutral‖ or totally ―independent‖ of

BP.‖337

The court criticizes Mr Feingold‘s misleading behaviour, including ―publicly advising

potential claimants that they do not need to hire a lawyer and will be much better off accepting what

he offers rather than going to court.‖338

Mr Feingold was instructed to identify his relationship to BP

and advise claimants that they had an attorney.339

The claims website homepage states that ―You have

the right to consult with an attorney of your choosing before accepting any settlement or signing a

release of legal rights.‖340

The claims facility is still referred to as ‗independent‘ on US government

327

Idem, Mr Feingold, attorney at law, is responsible for determining eligibility of the claims on the basis of

supporting documentation submitted by the claimants. 328

Larson N.F., Newsroom, WUSTL Law dean to oversee $20 billion BP Gulf fund, 9 August 2010, at:

http://news.wustl.edu/news/Pages/21000.aspx,accessed on 14 August 2011. 329

Gulf Claims Facility Home Page, http://www.gulfcoastclaimsfacility.com/, accessed on 14 August 2011 330

Idem, note that ―personal injury or death‖ do not actually fall within the scope of the OPA . 331

BP: Oil Spill. 332

Oil Pollution Act, supra note 318. 333

Environmental Law Institute: Oil Litigation Database, at:

http://www.eli.org/programme_areas/deepwater_horizon.cfm, access on 14 August 2011. 334

Letter to Mr Feinburg by Stephen Gillers, 28 December 2010, at:

http://www.gulfcoastclaimsfacility.com/Gillers_Feinberg_Doc_2010.pdf , accessed on 14 August 2011. 335

Idem. 336

Supra note 236. 337

Idem. 338

Idem, at 13, (paraphrasing a quotation.) 339

Idem. 340

Supra note 329, at: http://www.gulfcoastclaimsfacility.com/index,accesed on 14 August 2011; This is

presumably translated into the other languages.

50

website restorethegulf.org341

and confusion is likely to continue. Furthermore, claimants have

criticized the claims process for its lack of transparency.342

Filing Process

In contrast to the complex calculations of liability set out in the Oil Pollution Act, the filing process

itself is fairly simplistic. An injured party need only visit gulfcoastclaimsfacility.com which instructs

them to file a claims form and supporting documentation by email, fax, or postal service.343

The claim

is reviewed by the administrator and the trustees distribute the funds. BP or the claimants, if the

amount in controversy is over $250,000344

, may appeal. At this point the claim is reviewed by the

Appeals judges.345

The simplicity of the process, as outlined by the Oil Pollution Act, allows the

injured party to recover without the cost of a lawyer and the associated litigation fees. Theoretically,

this process is also faster as it bypasses crowded dockets.346

BP also benefits from the fund in that

individuals choosing to settle now are later prohibited from bringing suit at a later point in time where

the long term damage of the oil spill is more apparent.347

Some damage resulting from the oil spill may

take time to become visible.348

The Gulf Coast Claims Facility faces further criticism related to the claims. Debate rages over whether

the affected parties are receiving appropriate compensation; while some parties such as fishermen

claim that their losses are not being fully compensated349

, there also exist cases of fraud.350

As a result,

the Department of Justice has called for an audit of the facility351

and the state of Mississippi has filed

suit alleging that the lack of transparency in the claims process constitutes failure to comply with state

consumer protection laws.352

As such, one cannot help but question the effectiveness of the claims

facility.

Other Aid

341

See supra note 325, the Process http://www.restorethegulf.gov/assistance/file-claim/claims-process,accessed

on 14 August 2011. 342

Spear, K. O. Sentinel, Orlando Sentinel.com, BP Oil Spill Hit Florida Hard , But Claimants Remain

Frustrated. 26 December 2010, at: http://articles.orlandosentinel.com/2010-12-26/news/os-bp-spill-claims-

florida-20101226_1_bp-oil-spill-bp-plc-gulf-coast-claims-facility; and also B. Cappo, WWLTV.Com, Man on

Knees Begs Ken Feinberg for help,11 January 2011, at: http://www.wwltv.com/news/Man-On-Knees-Begs-Ken-

Feinberg-For-Help-113304209.html,all websites accessed on 14 August 2011. 343

See supra note 325, Claims process for Individuals and Business. 344

Most claims that have been granted thus far are in the $5,000 range and so would not be eligible. However, it

is unclear if the claims granted thus far are indicative of the overall makeup of claims; claims regarding larger

http://www.gulfcoastclaimsfacility.com/GCCF_Overall_Status_Report.pdf, accessed on 14 August 2011. 345

The Claims Administrator appointed an Appointing Authority who appointed the Appeals Judges, who are a

variety of legal scholars from across the affected region. http://www.gulfcoastclaimsfacility.com/faq#Q14. 346

See supra note 328, http://www.gulfcoastclaimsfacility.com/GCCF_Overall_Status_Report.pdf, accessed on

14 August 2011. 347

Idem. 348

For example, Dr Lichtveld of the Tulane University School of Public Health and Tropical Medicine has just

begun a five year study on the effects of the oil spill on women‘s health. See at:

http://tulane.edu/news/newwave/070811_lichtveld.cfm?utm_campaign=&utm_medium=riptide.me-

email&utm_source=facebook.com&utm_content=awesm-publisher, accessed on 14 August 2011 349

Nola.com article on oyster fishermen 350

The US Department of Justice, Office of Public Affairs, Justice Department Charges Seventh Individual for

Allegedly Filing Fraudulent Claims for Oil Spill Compensation,10 December 2010,

at:http://www.justice.gov/opa/pr/2010/December/10-crm-1423.html,access on 14 august 2011 351

Helgoth, A. The Walton Sun, Justice Department to audit Gulf Coast Claims Facility,22 July 2011,

at:http://www.waltonsun.com/news/panama-95480-newsherald-coast-department.html, accessed on 14 August

2011 352

Chappell, B. ―Mississippi Sues BP Oil Fund Administrator, Seeking Access To Records‖,12 July 2011, at:

http://www.npr.org/blogs/thetwo-way/2011/07/12/137802072/mississippi-sues-bp-oil-fund-administrator-

seeking-access,accessed on 14 August 2011.

51

In addition to the compensation discussed above, individuals have additional options for assistance.353

Federal Disaster Assistance has proven instrumental in providing aid for communities devastated by

the incident in the form of food assistance and environmental monitoring. The Small Business

Administration also made low interest loans available to small businesses affected by the disaster.354

353

The White House, Office of the Press Secretary, Fact Sheet: Deepwater Horizon Oil Spill legislative package,

12 May 2010, at:http://www.whitehouse.gov/the-press-office/fact-sheet-deepwater-horizon-oil-spill-legislative-

package, accessed on 14 August 2011. 354

Idem, The SBA is a government agency that addresses the interests of small businesses.

52

Table 3.3.8 3.3.8 Conclusion

Table 3.3.8 presents an overview of actions in the BP case. The authors have come to the following

observations regarding the remedies offered by BP in response to the Gulf Spill:

(i) The Deepwater Horizon incident represents a failure of safety standards, a fact recognized

both by BP itself and the preliminary investigation team.

(ii) BP engages in a number of corporate grievance mechanisms, as discussed in 3.3.2.

(iii) BP also provides remedies to victims of the Deepwater Horizon incident in the form of its

mandatory contribution to the Fund.

(iv) The Fund has garnered criticism for its lack of transparency.

(v) Thus while the Fund is a step towards providing remedies as discussed in the Ruggie

framework, it is not sufficient.

(vi) This demonstrates the need for community interaction for the creation of effective remedies.

While BP is to be lauded for its paper commitment to stakeholder interests and sustainable practices,

the lack of practical application as regards preventing and remedying is problematic. The combination

of this general disconnect between corporate policy and the enforcement of such policies concerned

with stakeholder interests is worrying. In combination with the limitations placed upon recovery by

the OPA and the class action process, one must wonder what BP‘s commitment to ―paying all

legitimate claims‖ truly entails and it remains an open question whether it is even possible for the

injured parties to receive adequate compensation at all under this system of remedies.

BP Case plaintiff defendant stakes type of litigation finished/appeal enforcement

OPA (settlement)

Individuals or businesses affected

BP (BP can try to recover its costs in separate suit if can prove Transocean at fault)

Monies in the Fund

settlement: give up litigation in favour of lump sum payment

if denied, may appeal to Appeals Judges

claims paid by trustees

Individual affected individuals

BP, Transocean, Halliburton (other two are likely to be joined, jury will allocate fault) damages civil ongoing damages awarded

Criminal US gov

BP (Transocean, Halliburton may also be involved)

criminal responsibility, punitive damages criminal

investigation, no charges as of yet

criminal: prison possible though unlikely

class action classes not yet certified BP et al damages civil ongoing damages awarded

Admin

gov (citizen can raise issue) BP et al penalities

violation of Clean Water Act, etc.

appeal to admin judges penalties

53

4. CONCLUDING COMPARATIVE ANALYSIS CORPORATE REMEDIAL RESPONSES

OIL POLLUTION INCIDENTS

Having discussed the remedies undertaken in three separate cases, the writers now analyse the actions

taken by the companies using the Ruggie Framework. As discussed in section 2.2, the GP discuss

standards for determining the effectiveness of remedies, such as legitimacy, accountability,

predictability, equitability, transparency, rights compatibility and the application of lessons learned.

Table 4 illustrates the findings when applying these standards to the three cases at hand.

Accessibility Transparency Effectiveness (effective remediation to

people, environment, society)

Cooperation and engagement

with the already established

and recognized effective

grievance mechanisms

such as: NCPs, Ombudsman-

Like Shell, BP and Chevron

could have done.

Development of the already

established corporate

grievance mechanisms such

as OpenTalk Lines and

employee Hotlines-Like all

three companies could have

done

Establishment of local access

points as common places for

companies, victims and third

parties to develop and

provide non-judicial remedies

to the victims or to

commence negotiation

processes. Like Shell, BP,

Chevron could have done.

Participation and active

cooperation with the public

sector in developing

mediation and arbitration

institutes that provide non-

judicial access to remedies-

Like all three could have

done.

Avoidance of any

accessibility barriers for

remedy such as local

illiteracy, physical or natural

barriers, lack of financial

means, voluntary legal aid-

Like Shell, BP, and

Chevron could have done

Access points that are

culturally adjusted to the

victims‘ and their cultural

and educational background-

Like especially Chevron

could have done.

Helping victims to assess,

and understand their options

for accessing remedies and

help them connect the

remedies to the necessary and

available resources-Like

Shell, BP, Chevron could

have done.

Community education

Active participation of the

parties to the available

remedy processes-Like all

three could have done.

Promoting awareness of the

benefits and the advantages

of the remedy process-Like

all three could have done.

Development of process

standards and principles for

the remedy. -Like especially

BP and Chevron could have

done .

Avoidance of corruption and

establishment of clear

processes by advanced public

disclosure .-Like all three

companies could have done.

Promotion of the adequate

and effective information and

risk assessment mechanisms

for the victims towards

remedy; sharing information

about environmental

assessments, both before and

after spills-Like Shell,

Chevron and especially BP

could have done.

Avoidance of the

disadvantages of the

adversarial legal system by

providing sharing

information processes and

disclosure between the

parties-Like especially Shell

could have done under

Dutch Law.

Dialogue –based approach,

alleviation of conflicts of

interest between the parties to

achieve a final consensus-

Like all three could have

done.

Specific determination of the

role of the third parties in the

remediation processes such

as government and NGOs to

assist victims, and mediators

and arbitrators to serve as

neutral intermediaries-Like

especially Chevron could

have done with the

Ecuadorian Government

and the Amazon Defense

Apology, Recognition of the

harm -Like all three could

have done and especially

Chevron when it was asked

by the Ecuadorian Court.

Building trust with the

harmed and society-Like all

three could have done.

Physical compensation-

remediation and reparation of

the environment. Repair

natural landscape as it was

before the harm-Like

especially Shell and BP

could have done and

Chevron did it

inadequately. The UNEP

Report also emphasised the

importance of a full

restoration of the

environment.

Financial compensation to

victims: Introduction and

establishment of remediation

funds.1.Proactively - they

can be used as the ‗just in

case‘ funds. 2. -

Retroactively they can be

used to compensate the

victims-Like BP did and the

UNEP Report proposed for

the Ogoni victims.

Avoidance of the

socioeconomic approach of

CSR. Those funds should be

clearly developed as

remediation funds for the

violation of the victim‘s

human rights. (Thus

companies can‘t claim that

they spend millions for the

social and economic

development of developing

areas).

Mandatory participation of

the companies to public

initiatives compensating

victims –Like BP could

have done with the Gulf

Claims Facility.

Alternative and Community

Dispute Resolution

Mechanisms Mediation-

Arbitration Initiatives

54

programmemes regarding the

access to the remedies. Like

all three should have done

Coalition and Shell could

have done by accepting the

role of Milieudefensie in the

Dutch tort litigation.

1.Governance by a diverse

multi-stakeholder advisory

body or governing board to

enhance credibility and

confidence-Institutional

cooperation and affiliation.

2.A networked structure

approach is appropriate for

an international mediation

facility. 3.Building the

capacity of mediators

4.Building a clearinghouse

for case stories.-Like

Chevron did and BP ,Shell

could have done.

Avoidance of costly litigation

and emphasis in the actual

compensation of victims-

Like all three could have

done.

Table 4.1. Overview of elements of effective remediation

Interestingly, in the three cases the companies rely heavily upon existing judicial remedies as has been

demonstrated in the previous sections and in Table 4.2. The Remedies Chart [see Excel doc to be

inserted here]. Alternative dispute mechanisms are almost wholly unconsidered, as one sees in Table

4.1, except in the case of the arbitral tribunal in the Chevron case. While it is understandable that such

a framework may be preferred by victims due to the (theoretical) neutrality of the court system,

corporate involvement is also necessary. Such initiatives must be of a complementary character

without undermining the legal and judicial existing mechanisms.355

Their form is of a hybrid character

that stands between formal litigation and ad hoc public consultation or mediation.356

Looking at the solutions offered by all companies, one sees as a common thread the lack of

transparency. There exists a lack of coherent information to citizens about oil operations and potential

health risks as the right to a healthy environment requires. Those affected by the disasters are both

uncertain about their options for recompense and whether the actions taken by companies are

sufficient (consider the cases of BP and Chevron and contradictory evidence regarding the presence of

toxic chemicals). Further transparency regarding both the relief procedure and the facts of the incident

would go a long way towards assisting victims in rebuilding their lives. Unfortunately the current

litigation system does not encourage such transparency; due to the adversarial process companies have

every incentive to keep disclosure limited to the minimum required by law. The adversarial process

also negatively affects community relations; an apology and recognition of the harm caused by oil

spills would be beneficial in building the trust necessary to work together to rebuild affected

communities. For liability reasons, however, companies are reluctant to apologise or otherwise admit

fault. While judicial remedies are a necessary part of the remedy process, one must be aware that their

existence and the process of trial preparation may impede other efforts.

The Ruggie Framework provides for the interaction of State and company forms of remediation. One

sees an example in the case of BP, where BP created the Fund at the behest of the US government. As

discussed in section 3.3.7, this Fund is not without problems but represents an attempt to make victims

whole without requiring lengthy litigation. Interestingly, the Fund is available to victims even without

a direct finding of fault on the part of BP. BP may, if it successfully brings suit against a subcontractor

and is found not liable, recover these costs. In the meantime, however, fishermen can use the funds

compensating for a lost season to outfit their boats and attempt to return to normalcy. Again, the Fund

does raise concerns as discussed in section 3.3.7 (many of these concerns related to a lack of

transparency), but it represents the most successful melding of state and corporate remedy procedures.

From the cases, one sees an evolution of remedy procedure, moving from the minimal public

involvement in the Texaco settlement, to the NGO cooperation in the Shell case, and finally to BP‘s

355

See supra note 7. 356

Idem.

55

Fund. These steps toward a fully effective remedy show the vital importance of involvement by the

company, community, and government, as well as the need for transparency through the entire

process. It is only by learning from the and partial successes of the past that a fully effective remedy

procedure can be created and implemented. Interestingly, the recent UNEP Report on human rights,

pollution and the lack remedies in the Nigerian Ogoni Delta, also suggests to establish a remedy fund,

governed by neutral fund managers and to set up various board(s) to supervise the envisaged

remediation process. The Report recommends that the oil companies and the Nigerian government

contribute the money to this fund.

It is interesting to witness the development that parliamentary hearings were organised (i) in the

Netherlands to question Shell‘s practices in Nigeria and (ii) in the US to question BP executives about

the Gulf accident and oil spill. These companies were publicly requested to explain their corporate

policies concerning avoiding environmental pollution and respecting human rights. Also, in 2009

banks were invited by parliaments in various countries to explain their role in the financial crisis of

2008. One could consider this as a way to holding multinational companies publicly accountable for

their policies and the ways in which they provide remedies when things go worng. In the Netherlands,

the MPs explicitly alluded to the Ruggie Framework and brought up the question to what extent Shell

is remedying the problems connected with the oil exploitation. One could see these new types of

hearings as public stakeholder meetings in which companies are questioned about their CSR strategy

and policies and in particular which remedies they employ to solve problems.

Retroactively cleaning up and making a restart as a responsible company would in our opinion include

allocating part of the profits so as to make a true clean sheet in the area of human rights. Obviously,

the shareholders would have fewer dividends this year, but these incidents concern real human rights

problems that, while a result of past actions still have significant consequences. This is clear from the

continuing protests and litigation. Consequently, remedy requires recompense both for the past and a

safer plan for future operations by BP, Shell and Chevron (‗We Agree‘).

BP-Shell-Chevron

Restoring

nature

(defining

victim/polluter

)

MoU:(Before/af

ter polution

incident)

Villagers

response

BP: Oil spill in Gulf of

Mexico April – September

2010)

Run by US gov,

BP contribute to

Oil Liability Fund n/a

Assorted groups:

LEAN, Coastal

Birds, etc.

Shell: Three cases of oil

pollution in 3 villages in

Nigeria: Oruma, Goi, Ikot Ada

Udo. Each started a tort case -

together with Friends of the

Earth NL and Nigeria – before

a Dutch court against Shell

Holding and Shell NIgeria)

Nigerian law

obliges the

operator to do so

n/a

Various (source:

shell report)

Have tried for

long to solve the

problem with

Shell Nigeria

Chevron:1965-1992

extensive oil pollution in the

region of Oriente especially in

Lago Agrio village:

Case1:Aguinda case-tort case

(US)

Case2:Lagio Agrio tort case

(Ecuador)

Case 3:Arbitration

proceedings-BIT Ecuador-

US,Hague (NL)

Case4:RICO lawsuit against

LAP and lawyers –criminal

proceedings (US)

1/3 restoration of

the contaminated

regions in 1992

after the

expiration of the

concession

contract with the

Ecuacorian

government n/a

Several

Demonstrations

outside of

Chevron’s

Building in

California by

villagers who

travelled

especially for

that reason in

the annual

shareholders

meeting , also in

’’Crude ‘’

documentary

,collaboration

between NGOs

and local people

Mediation Settlement

Class

possibilities

Legal

(alternative)

instruments

Type of

claims

n/a

Oil Pollution Act, most

common means of

recovering so far

Unclear, due to

limitations of

WalMart

OPA, court

system See chart

Not applied

n/a Not applied

Under Dutch law

possible (3:305a

DCC), including

NGOs as

representatives.

But these cases all

include a victim

and the

NGO

Plaintiffs used

Dutch tort

law; Shell

submitted

various

technical

defences

(forum non

coveniens, lis

pendis, new

Shell holding

co hence

wrong entity) Tort

Not applied

n/a

1992

Settelement agreement

between TEXPET and

Ecuadorian gov,TEXPET

to clean up 1/3 of the

contaminated area and

release of any future

liability for the remediated

and/or non remediated

areas.Governmental

Consent .Allegations for

fraud against chevron in

setting up the agreement.

Under Ecuadorian

law:(2236ECC) in

all cases of

contingent harm

that threatens

indeterminate

persons,Aguinda

and Lago Agrio

class actions,

US Law?

Aguinda

case,ATCA

dismissed on

forum non

conveniens,La

go Agrio Case

:EMA and

other tort

laws, Chevron

answered with

the Arbitration

proceedings

and the RICO

filing Tort

Information

sharing Disclosure

Transaparency 1:Info-sharing on pollution

and cleaning 2: on money available for claims

3: on resposibility and verification (open

records/ open proccess)

FRE. Adversarial

process

FRE no US

framework for

co-discovery

Shell takes the

position that it does

not want to share the

info requested by the

plaintiffs, hence

plaintiffs started

document disclosure

procedure under

Dutch law (exhibitie)

Adversarial

prossess

exhibitie

By the year 2000

transition form

inquisitorial to

adversarial prossesses-

Creation of

cooperative courts

with computerised

case tracking

,dedicated file rooms

,work stations,public

counters where

information about

cases and access to

files is provided id.

Allegations against the plaintiff's attorney

Steven Donzinger for fraud- Allegation

against Amazon Defence Coalition:the

trustee of the plaintiffs' compensation